THE government has with immediate effect handed Letšeng Diamonds a 10-year extension of its mining lease, major shareholder Gem Diamonds has said.
Gem Diamonds made the announcement in a recent statement.
The new contract also increases the sales royalties payable to the government from eight to 10 percent with effect from 3 October 2019.
The mine’s current lease was meant to expire in 2024.
Gem Diamonds owns 70 percent of the mine while 30 percent is controlled by the government.
The increase in royalties comes on the back of exasperation of different quarters including parliament which has previously complained that mines were paying less than the statutory 10 percent.
The royalty could either be paid in full or in part in the event that Letšeng embarks onto any material capital project.
“Gem Diamonds Limited (LSE: GEMD) is pleased to announce that the mining lease for the mine has been renewed by the government,” the London Stock Exchange listed Gem Diamonds said in a recent statement.
“Following a successful statutory negotiation process, the terms of the renewed mining lease were agreed with the Lesotho Mining Board and include the following material terms:
“The lease is renewed with immediate effect for a period of 10 years (the maximum period allowed under the 2005 Mines and Minerals Act — the Act) with an exclusive right granted to Letšeng to renew the mining lease for a further period of 10 years.
“…The royalty payable in respect of diamonds sold by Letšeng is increased from eight percent to 10 percent (the current stipulated rate under the Act) with effect from 3 October 2019.
“The royalty may be remitted in whole or in part in the event that Letšeng embarks upon any material capital project.”
Gem Diamonds’ chief executive officer (CEO) Clifford Elphick said the extension would allow the mine to continue making significant economic and social contribution to the people of Lesotho.
“The mining lease renewal will allow the Letšeng mine to continue making a significant economic and social contribution to the people of Lesotho,” Mr Elphick said.
The extension of mining lease ends a negotiation process that began last year. Gem Diamonds first expressed confidence in the mining lease’s renewal during the Commonwealth Heads of Government Meeting in London from 16 to 20 April 2018.
Former Mining Minister Keketso Sello, who recently moved to the Ministry of Transport confirmed the extension of the mining lease.
“The lease was extended after the government took time to scrutinise the offer from Gem Diamonds to ensure that it serves the best interests of the people,” Mr Sello said.