…as Letšeng remains the only operational mine
Mohloai Mpesi
THE government has reduced royalties payable by Letšeng Diamonds Mine from 10 percent to between 3 percent and 6 percent, citing the impact of the war in the Middle East on fuel prices and the global slump in diamond prices.
The disclosure is contained in Gem Diamonds Limited’s third-quarter trading update issued on 4 November 2026. Gem Diamonds owns 70 percent of Letšeng, with the remaining 30 percent owned by the government.
The update revealed that the government had approved a variable royalty rate.
Located in the Maluti Mountains in Mokhotlong District, Letšeng is renowned for producing large, exceptional white diamonds. It is regarded as the world’s highest dollar-per-carat kimberlite diamond mine and is now the only diamond mine still operating in Lesotho.
“As reported in the Half-Year Report 2026, Letšeng Diamonds was granted a royalty remission up to the end of September 2026. Post the Period, the government of Lesotho approved a variable royalty rate of between 3% and 6%, to be determined on the six-monthly average dollar per carat. This is effective for sales post 1 October 2026,” the statement reads.
Gem Diamonds Chief Executive Officer, Clifford Elphick, said sales of Letšeng’s rough diamonds in September had achieved good prices, with the results boosted by the sale of the exceptional 347-carat Lesotho Jubilee diamond.
“Sales of Letšeng’s rough diamonds in September achieved good prices, with results further supported by the sale of the exceptional 347 carat Lesotho Jubilee. These results are encouraging indicators that demand and prices for Letšeng quality diamonds are firm,” he said.
The royalty remission, which temporarily waived the mine’s royalty payments, had earlier helped the company reduce its costs.
Gem Diamonds returned to a modest first-half profit in 2026 after recording a loss during the same period last year. This was supported by a 38 percent increase in Letšeng’s average rough diamond price to US$1395 (about M23 000) per carat.
Minister of Energy and Mining, Lejone Mpotjoane, told the Lesotho Times yesterday that the diamond industry had been severely affected by the growing popularity of lab-grown diamonds, which had driven down prices in the global market.
Mr Mpotjoane said Letšeng was now the only operational diamond mine in the country, although its remaining lifespan was limited.
“Every Mosotho knows that we are left with only one diamond mine operating, which is Letšeng Diamonds. This means we have a big problem because market prices have decreased because of lab-grown diamonds,” he said.
Lesotho has four major diamond mines. The other three — Liqhobong, Kao and Mothae — suspended operations earlier this year amid high operating costs, driven partly by rising fuel prices, and weak global market conditions.
Mr Mpotjoane said the war in the Middle East, which had triggered a sharp rise in fuel prices, had further worsened the crisis in the mining industry.
The Middle east conflict, involving the United States, Israel and Iran, erupted on 28 February 2026 following US-Israeli military strikes on Iran. It has since spread across the region, with retaliatory attacks targeting energy infrastructure and commercial shipping. The disruption of maritime traffic through the Strait of Hormuz, a critical global oil and gas shipping route, has raised concerns about energy supplies and triggered sharp fluctuations in international oil prices. Attacks on oil facilities and tankers have further complicated efforts to stabilise fuel markets. These disruptions have had knock-on effects on fuel-importing economies around the world.
Mr Mpotjoane said the government had been compelled to reduce Letšeng’s royalties after the mine approached it for a review of the statutory 10 percent rate.
“The other issue is the war that took place in the Middle East, which caused fuel prices to increase sharply. Those two issues combined caused our mining industry to collapse.
“Right now, we have a big problem, hence the request by Letšeng Diamonds, which is the only mine still operating, that we examine the issue of royalties to solve the matter. That is the biggest reason we reduced the royalties from 10 percent. The cost to the industry was badly affected,” he said.
He said the revised rate would fluctuate between 3 percent and 6 percent depending on prevailing market conditions.
“It is a range. We look at the performance of the industry every month. When the records are released, we check whether the prices of diamonds and fuel have increased or decreased.
“Those are the issues we look at to decide where we stand. So, it is between 3 and 6 percent.”
Asked when Lesotho would start cutting and polishing diamonds locally, Mr Mpotjoane said the country was no longer producing enough diamonds to make such an investment commercially viable.
He said establishing a cutting and polishing industry would be particularly difficult with Letšeng being the only operational mine and having a limited remaining lifespan.
For years, Lesotho has spoken of beneficiating its diamonds by adding value locally instead of exporting them as rough stones.
“If this ministry had been in my control from the beginning, when we had many diamonds and mines, we could have made sure that it happened at that time. Right now, the Letšeng Diamonds mine is left with a very short lifespan.
“The investment to cut and polish diamonds in the country is very expensive. We ought to have done it a long time ago when we had a lot of diamonds.
“The number of diamonds recovered in Lesotho is very low now. It does not make a sustainable business case to say you can cut and polish diamonds in Lesotho,” he said.
He added that international markets remained more attractive because they offered better prices, while setting up local cutting and polishing facilities would require substantial investment.
“Therefore, the market that still holds good prices is outside the country. If you try to establish a facility that would cut and polish here at home, it will need a lot of investment and, looking at the lifespan of the mine that we have, it is too short to make a business case.
“It is an issue that we can consider should there be interested investors, but it is an issue that has a problem already. It should have happened 20 years ago.”
Meanwhile, Yearn for Economic Sustainability (YES) political party leader Molefi Ntšonyana has criticised the government’s decision to reduce Letšeng’s royalties.
In a press release issued this week, Mr Ntšonyana said the decision raised serious questions about the management of the country’s most valuable natural resources, particularly regarding transparency, accountability and national sovereignty.
“The Yearn for Economic Sustainability (YES) strongly condemns the decision by the government of Lesotho to reduce Letšeng Diamond Mine’s royalty rate from the statutory 10% to a variable rate of between 3% and 6%.
“This decision represents a deeply troubling development in the management of our country’s most valuable natural resources. It raises serious questions about transparency, accountability, national sovereignty and the extent to which this government respects the constitutional and statutory rights of the Basotho nation,” he said.
Mr Ntšonyana said the government had a responsibility to manage the country’s mineral resources in the public interest and should not make decisions that compromised the economic interests of Basotho without proper accountability.
“The government is entrusted with administering and managing these national resources in the public interest. It does not possess an unrestricted mandate to make decisions that compromise the economic interests of the Basotho nation without proper accountability.
“The minister must understand that the authority to administer our mineral resources is not a licence to treat our diamonds as personal bargaining instruments,” Mr Ntšonyana said.
