Fight over Mothae Mine


. . . as local firm accuses minister of violating bidding processes

Lekhetho Ntsukunyane

A LOCAL company has demanded that Mining Minister Lebohang Thotanyana cancel a contract he awarded to Lucapa Diamonds Company to operate Mothae Diamond Mine, citing unfinished police investigations into the bidding process.

Morafe Group Limited, which claims to be affiliated with mining firm Trans Hex Ltd, has also accused Mr Thotanyana of violating bidding procedures in awarding the contract to the Australian-listed Lucapa.

However, Mr Thotanyana has in turn dismissed Morafe Group Limited’s claims, saying it did not have any links with Trans Hex, hence no right to complain on the latter’s behalf.

The demand comes after the minister announced last week that commercial mining at Mothae was set to resume before year-end after government awarded Lucapa a contract to resuscitate operations at the mine which has been idle since 2015.

Mothae Mine, which is located close to the high dollar-per-carat gem producer, Letšeng Diamond Mine, was put up for sale by government in February 2016 after prospective buyer, Paragon Diamonds Limited had failed to secure the requisite funding within the given time frame.

Paragon had made an agreement in July 2015 with Mothae’s erstwhile majority owner, Lucara Diamond Corporation, to purchase its original 75 percent stake in Mothae for US$8.5 million (about M92.42 million).

However, after the deal fell through, the government temporarily assumed 100 percent ownership of the mine and asked potential investors to submit their Expression of Interest (EOI) letters for the acquisition of the mine.

Mr Thotanyana had said Lucapa met the government’s terms and assumed 70 percent share ownership of Mothae, with the rest remaining in government hands.

“Lucapa offered 30 percent free carry share to the government of Lesotho. They also offered US$9 million (M122.4 million) as a purchase consideration,” the minister said.

“They also committed to invest a total of US$60 million (M816 million), with US$8.5 million (M115.6 million) for phase one while constructing a new plant and US$51.5 million (about M700.4 million) for phase two. They also pledged to create 330 direct jobs excluding construction.”

He also explained that securing a partner for the government had taken a long time due to unforeseen challenges that plagued the procurement process. The ministry, Mr Thotanyana said, had to re-evaluate proposals from the five short-listed bidders following a breakdown in negotiations with the recommended bidder Sputnik Investments for the initial award.

Sputnik Investments was initially recommenced for the contract by the Mining Board after beating Trans Hex in the final two-horse race. The two companies eventually lost out after the re-submission of proposals from bidders that included Titanium and Lucapa.

“We had a problem with Sputnik as their focus seemed more on the first phase while phase two seemed conditional,” said Mr Thotanyana.

“On the first phase, they had committed the required M600 million, but on the second phase their M400 million investment was conditional. “Secondly, we could not reach an agreement with them on their debt-to-equity ratio, so we considered Trans Hex.”

Trans Hex also fell short because they had reduced the amount of free carry shares to the government from 25 percent to 12.5 percent, while the minimum amount of shares for the government should be a minimum of 25 percent, Mr Thotanyana explained.

“Secondly they told us that their investment would increase from M670 million to M1.12 billion without any change in the fundamentals.”

He pointed out that Lucapa emerged as the winner after a second re-submission of the offers from the five shortlisted bidders because the Australian company had mining operations in several countries.

“So when you compare its profile with the rest of the bidders, Lucapa is listed on the Australian Stock Exchange, and it is a highly reputable company operating in a number of African countries. They have thriving flagship operations in Angola and they have the experience to carry out the job.”

However, Morafe Group Limited has disputed the deal, accusing the minister of violating bidding procedures and ignoring a police investigation into the process.

In a letter dated 6 February 2017 and issued by the company’s lawyers, K. Ndebele Chambers, the company states that it has a “business arrangement” with Trans Hex.

“Trans Hex Ltd is one of the companies that submitted an Expression of Interest for the acquisition of shares in Mothae Mine on 10 February 2016,” say the solicitors on behalf of their clients.

Under their arrangement Morafe Group Limited would provide “certain services” to Trans Hex in the event that its bid is successful.

The firm goes on to claim that Lucapa did not submit an EOI during the bidding process in “flagrant violation of tender procedures”.

“Client (Morafe) has reported this matter to the Lesotho Mounted Police Service and the investigations are going on.”

The lawyers further state that the minister awarded the contract despite police investigations into their complaint of a previous bidding process. “Client further informs us that you are aware of an ongoing criminal investigation in relation to the same tender wherein the tender was awarded to Sputnik Ltd under suspicious circumstances.”

The firm then demands that Mr Thotanyana cancel the contract pending the finalisation of the complaint and “criminal” investigation.

“Client has further instructed us that we should demand a response from you within two days of receipt of this letter regarding your attitude, failing which we have been instructed to institute to interdict and nullify your award of the said tender.”

  1. Ndebele Chambers also wrote to Lucapa on Tuesday, demanding that the Australian firm “cease and desist” from accepting the contract pending finalisation of the investigation.

The letter partly reads: “We are of a firm view that the award of the tender to your company is riddled not only with irregularities but also suspicious acts of illegalities and possible fraud to the prejudice of Trans Hex Ltd and consequently, to the prejudice of our client.

“We wish to inform you that this has prompted the lodging of a criminal complaint with the Lesotho Mounted Police Service for investigations and prosecution of criminal conduct in the award of the said tender. Docket Number is CPHQ/P/11.”

The lawyers further demand a response within two days.

“Should you fail to act as per our demand, client has instructed us to do the following: Report this matter to Interpol and Australian Police; report this matter to the Australian Stock Exchange; and institute legal proceedings to interdict and nullify the award of the tender to Lucapa.”

Commenting on the letters yesterday, Mr Thotanyana said Morafe Group Limited had no right to complain on behalf of Trans Hex.

“The company (Morafe Group) does not have any links with Trans Hex. I had a meeting with the management of Trans Hex and they were surprised when I showed them the letters,” he said.

“The management were actually shocked because Trans Hex does not have any partners in Lesotho, especially Morafe. Ask Morafe if they have any formal links with Trans Hex, they will not produce any proof of that.”

Mr Thotanyana said he had asked the TransHex management about how Morafe got to know about their company.

“It appears TransHex had links with a former government official (name supplied) who could have assisted the company to come and invest in Lesotho. The suspicion is that Morafe got to know about Trans Hex through the official. I doubt Morafe people ever met or communicated formally with the management of Trans Hex.

“If there are any issues for Trans Hex to complain about, their management would do that themselves, not Morafe. If Morafe was interested in conducting mining operations at Mothae, they should have submitted their tender bid. They didn’t.”

Mr Thotanyana further explained that Lucapa had submitted their EOI in the resubmission of tenders.

“Morafe’s complaint is that Lucapa did not submit their EOI. That’s not true. Lucapa did not submit the EOI in the first tender, which Morafe is still mistakenly referring to. However, in the resubmission of tenders, Lucapa provided the EOI.”

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