LUCAPA Diamond Company Limited’s fledgling full scale diamond mining operations at its Mothae Mine have received a massive boost after one of its creditors agreed to reschedule the payment of its outstanding US$7, 5 million debt to 2022.
Lucapa sourced the loan from Equigold in 2017 and used it to finance the development of the Mothae Mine.
In a statement to the Lesotho Times this week, the Australia-based company said it had agreed with one of its creditors, Equigold, to defer the payment of its US$7, 5 million debt to 2022.
Under the original terms of the agreement, Lucapa would have repaid the US$7, 5 million loan by end of 2020 in four quarterly instalments of US$1, 9 million. The Equigold loan facility carries an annual interest rate of 13 percent.
The first of the quarterly repayments would have been made on 1 January 2020 but in terms of the new agreement, Lucapa is due to repay the loan in eight quarterly instalments of US$0, 9 million each with the first instalment due on 1 April 2020.
The last of the instalments is now due on 1 January 2022.
“Lucapa used the 2017 Equigold loan to help finance the development of the company’s second high value diamond project, the new 1, 1 million tonne per annum Mothae kimberlite mine in Lesotho,” Lucapa said in its statement.
“The net effect of the amendments (to the loan agreement) will be to defer until 2021/22 a total of US$4, 7 million in capital repayments which would have otherwise been payable by Lucapa to Equigold in 2020 under the original agreement.
“No additional fees or penalties will be payable by Lucapa under the amended agreement with Equigold, a company associated with prominent Singaporean-based resources investor and major Lucapa shareholder Mr Simon Lee AO.”
Lucapa Managing Director Stephen Wetherall said, “The amended loan repayment schedule will give Lucapa and its project partners additional flexibility in both the scheduling of rough diamond tenders and the sale of select manufactured diamonds under the group’s cutting and polishing strategy”.
“We extend our sincere thanks and appreciation to Equigold for its continued support of Lucapa’s strategy to grow as a producer of high-value diamonds.”
Mothae Mine is located close to the Letšeng Diamond Mine in Mokhotlong and it was put up for sale by the government in February 2016 after a prospective buyer, Paragon Diamonds Limited, failed to secure the requisite funding within the given time frame.
In April 2017, the government awarded mining rights to Lucapa Diamonds to develop the mine which had been idle since 2015.
Company documents seen by the Lesotho Times indicate that the trial mining at Mothae produced more than 23 000 carats of diamonds with sales exceeding US$17 million.
This led Lucapa to draw up a development plan in October 2017, which outlines proposals to move into phased commercial production before the end of 2018.
Phase I of full-scale mining eventually began in January 2019 and is expected to continue until 2021. Phase II will run from 2022 to 2031.
Lucapa secured a US$15 million financing loan from Equigold in 2017 to develop Phase I of the Mothae project.
Phase I is expected to generate gross revenue earnings of US$79, 6 million while Phase II is expected to generate gross revenue earnings of US$697 million.
Lucapa is expected to incur royalties and marketing costs of US$5, 6 million for Phase II and US$48, 8 million for Phase II.
Operating costs for Phase I have been pegged at US34, 1 million while those for Phase II have been pegged at US$307, 8 million.