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Funding boost for Mothae Mine

by Lesotho Times
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Herbert Moyo

LUCAPA Diamonds have been handed a massive boost in its quest to commence full scale diamond mining next year after the   government of Lesotho resolved to defer the former’s outstanding consideration payments for its 70 percent stake in the Mothae Mine to June 2018.

Lucapa has budgeted US$17 million to commence Phase 1 of full scale mining in 2018. Phase 1 of mining will run from 2018 to 2021

To this end, Lucapa have secured an additional US$15 million (M195 million) financing loan to develop Phase 1 of the Mothae kimberlite diamond mining project.

The latest developments will enable   Lucapa to move from the current trial mining into full operations at its Mothae Mine in Lesotho in the second half of next year.

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

In April this year, the government of Lesotho 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 in the second half of next year.

Lucapa has so far paid US$4, 5 million out of the US$9 million it owes the government of Lesotho for the 70 percent shareholding it acquired in Mothae Mine.

It was initially scheduled to pay the outstanding US$4, 5 million balance in eight monthly instalments starting in October 2017.

However, the government has resolved to allow Lucapa to defer payment of the outstanding balance to June 2018 to enable Lucapa to channel the resources into ensuring all is in place full scale mining operations to commence in 2018.

“US15 million has been secured from Equigold and the government of Lesotho has deferred US$4, 5 million in Mothae (Mine) consideration payments to June 2018,” Lucapa states in its documents.

Equigold is a company associated with prominent Singaporean-based resources investor, Simon Lee AO.

In addition, Stephen Wetherall, the Managing Director of Lucapa Diamonds is quoted by the Mining Weekly website saying, “The US$15 million financing facility enables Lucapa Diamonds to meet one of its key strategic objectives of growing diamond production in the large and premium-value sector – a segment of the global market where sales and pricing has remained robust”.

“This facility is a significant result for Lucapa Diamonds and its shareholders.

“It ensures that the company, together with the Government of Lesotho, will bring Mothae on stream in 2018, adding a second cash producing asset and high-value producing mine to the group that will complement the top-quality diamond production from Lulo (mine in Angola),” Mr Wetherall said.

The loan is repayable in eight quarterly payments commencing in December 2018, by which time Lucapa Diamonds expects Mothae to be in steady state production.

The Equigold facility carries an annual interest rate of 13% and other fees.

The facility includes a provision for Equigold, should it so wish, to convert the last two scheduled quarterly payments (totaling US$3.75 million) into ordinary shares in Lucapa Diamonds.

Phase 1 is expected to generate gross revenue earnings of US$79, 6 million while Phase 2 which will run from 2022 to 2031 will generate gross revenue earnings of US$697 million.

Lucapa is expected to incur royalties and marketing costs of US$5, 6 million for Phase 1 and US$48, 8 million for Phase 2.

Operating costs for Phase 1 have been pegged at US34, 1 million while those for Phase 2 have been pegged at US$307, 8 million.

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