THE government of Lesotho has approved Paragon Diamonds Limited’s acquisition of a majority stake and operatorship of Mothae Diamond Mine.
The approval follows Paragon’s finalisation of an agreement on 14 July with Lucara Diamond Corporation to purchase its 75 percent stake in Mothae for $8.5-million (about M92.42 million).
Situated on the southern edge of the Kaapvaal Craton, which hosts the diamondiferous northern Lesotho kimberlite field, Mothae Diamond Mine is 25 percent-owned by the government of Lesotho.
Next to Gem Diamonds’ Letseng mine, Mothae Diamond Mine has an indicated resource of one million carats and an inferred resource valuation of $1 billion.
According to Paragon’s Executive Chairman, Philip Falzon Sant Manduca, following the approval, they would now proceed with the finalisation and subsequent completion of the acquisition. Lucara will receive five percent of the profits derived from the sale of polished diamonds from Mothae and five percent of the profits achieved from the sale of rough diamonds that are not selected for polishing.
Once completed, Paragon plans to develop and commence production at both Mothae and its nearby Lemphane project simultaneously, to take advantage of economies of scale and minimise costs. In the first full year of production, Paragon says it is targeting combined revenues of approximately US$36 million from both Mothae and Lemphane.
Said Mr Manduca: “The process to obtain formal approval to acquire Mothae took longer than all parties anticipated, having received verbal approval from the Minister at my meeting with him on the 22 June 2015. In any event, with the approval now to hand, we can now progress the acquisition and development of Mothae.”
He said the company was now working on concluding the funding for both mines, and has held several high level discussions with potential investors, with the aim of securing an investment partner for the long-term.
“There is clear and present evidence to hand that our strategy of focusing on the investment grade diamond sector as an alternative to paper money is correct. I am so bullish about our prospects as a company and I look forward to updating shareholders in due course,” said Mr Manduca.
“I believe that analysts are focusing more and more on our vertically integrated strategy for the diamond industry, as the wholesale market gets squeezed into having to occupy a smaller role, allowing producers such as Paragon to capture the additional profit margin by transacting directly with investors and consumers.”
He continued: “Indeed, I think a valid analogy is that Paragon could be viewed, by those seeking to invest in the currency of diamonds, like a central bank, producing a financial currency, whilst our distribution approach downstream is akin to a commercial banking system through which real wealth can be acquired and stored in that currency.
- Advertisement -
Investment grade diamonds are a better, more mobile currency and store of wealth than financial paper, real estate, art, cars or gold. Paragon is in the right place at the right time and remains deeply undervalued to its asset base.” – Staff Writer