News Without Fear or Favour

Lucapa wants exclusive marketing rights for Mothae diamonds

Bereng Mpaki

MOTHAE diamond mine has temporarily suspended operations to pave way for the reviewing of Lucapa Diamond Company’s diamond marketing proposal.

If effected, the proposal will give Lucapa, an Australian company, exclusive diamond trading rights for the next five years.

Lucapa is the majority shareholder in the mine with a 70 percent stake while the remaining 30 percent is controlled by the government. The mine started commercial mining in January 2019.

The mine is currently under care and maintenance after suspending operations in June 2020.

Mr Qoo said in its request, Mothae Diamonds Pty Ltd wants the government to allow Lucapa to handle selling of the mine’s rough diamonds for a period of five years without following any tendering processes.

He told the media on Tuesday that the government has asked the mine to cease operations to afford it time to consider the mine’s proposal.

He also quelled rumours that Mothae mine was unable to resume operations because the government had rejected its request to alter the current marketing agreement.

“On 30 March 2020, Mothae mine made a request with three issues the first of which is the deferment of paying royalties from April 2020 to March 2021,” Mr Qoo said.

“Secondly, the mine asked to be permitted to defer payment of surface rent for 2020. The arrears will be settled in 2021.

“Thirdly, the mine requested to be to identify alternative sales and marketing channel, while there is lockdown in Antwerp.”

Mr Qoo said they informed the mine on 28 May 2020 that their request to defer paying royalties had been granted.

“The mine was also informed that their second request has not been accepted and must therefore continue paying ground rent. On the third request, the ministry granted permission to the mine to consider for alternative ways of diamond trading.

“Mothae then went on to make a-mine-refinancing proposal that was coupled with method of sales of diamonds, and their request is as follows “To sell all its diamonds directly to Lucapa Diamond mining (their parent company) for a period of 5 years without any tendering or auction process”.

“Since this is a very unique and sensitive request, the ministry found it prudent not to rush in making the decision but to discuss it with relevant parties first…”

He said the ministry was addressing the matter to ensure that the country continues to benefit from the mine’s operations.

“Talks between the government and the mine management are ongoing, and the public is therefore informed that the matter is being handled with utmost caution by the ministry and once done, the outcome of the talks will be announced.”

Meanwhile, Lucapa which also operates Lulo Mine in Angola, recently said its revenue declined by 80 percent to $2 million compared to the same period last year.

Its sales volume dropped by 40 percent to 3 346 carats, while its average price slumped by 67 percent to $594 per carat.

The diamonds Lucapa offloaded during the period were sold through its cutting and polishing partnership with Graff subsidiary Safdico, which purchases the stones at full rough-market value and shares the proceeds of the polished sale with the miner.

Meanwhile, Lucapa managing director Stephen Wetherall yesterday said they were hopeful to restart mining soon.

“Lucapa submitted a strong marketing proposal to the government that we believe underpins the future of the Mothae diamond mine, especially in these uncertain times.

“The commercial terms of the proposal are the subject of current interaction with the government and the key terms, which include an offtake arrangement, will be outlined in a separate update once finalised with the government,” Mr Wetherall said.

He added that the marketing proposal would unlock the full value of Mothae’s kimberlite.

Leave A Reply

Your email address will not be published.