LETŠENG Diamond Mine has paid a dividend of US$5, 2 million (about M70 million) to the government of Lesotho as share of the US$ 17, 4 million (about M237 million) total dividend for the 2018 financial year.
The mine, which is 70 percent owned by United Kingdom- based Gem Diamonds and 30 percent owned by government of Lesotho, has also indicated that the statutory negotiation process relating to the renewal of its mining lease is progressing well and updates will be provided in due course.
A trading update that was recently released by Gem Diamonds detailing the company’s operational and sales performance for the period from 1 October 2018 to 31 December 2018 (Q4 2018) showed that dividends were paid during the fourth quarter of 2018.
“During the period, Letšeng paid dividends of US$ 17, 4 million, resulting in a net cash flow of US$11 million to Gem Diamonds and a cash outflow from the group for withholding taxes of US$1, 2 million and payment of the government share of dividend of US$5, 2 million,” the company said in a statement.
There have however, been concerns that despite the mine’s reputation as the highest dollar per carat kimberlite in the world, the government does not realise significant revenue inflows from the sales of its diamonds.
Finance Minister Moeketsi Majoro told this publication last May that although Lesotho would occasionally make massive diamond finds including the 910-carat ‘Lesotho Legend’ discovered in January last year, unfavourable contracts that the successive governments negotiated with the mining companies negatively impacted on the earnings that accrued to the state.
He said although the government had negotiated for 10 percent royalties from the sale of diamonds, the state was often forced to settle for as low as eight percent as was the case with the ‘Lesotho Legend’. He said this was because mining companies often pleaded with government to accept a lower percentage in royalties, citing operational costs which reduced their profit margins.
The government only realised US$3, 2 million (about M43 million for the sale of the 910-carat Lesotho Legend.
This is despite the fact that the Lesotho Legend is the fifth largest ever recovered in the world and it went on to fetch a whooping US$40 million (about half a billion maloti) at an auction in Antwerp in Belgium last year.
Meanwhile, the mine recovered a record 15 large diamonds larger than 100 carats during 2018, as its good operational performance continues.
The mine last recorded a high number of diamonds that are greater than 100 carats in 2015 with 11 recoveries, while there were only seven such recoveries in 2017. The mine also recovered a total of 126 875 carats during 2018, which represented a 13 percent increase from 111 811 carats in 2017.
The mine sold nine diamonds for more than US$1 million (about M 72 619) each, generating revenue of US$14, 6 million during the fourth quarter of 2018. This resulted in 44 diamonds being sold for more than US$1 million each during 2018, generating revenue of US$137, 2 million.
“The large diamond recoveries continued during the period with three diamonds greater than 100 carats being recovered, resulting in the highest number of these recoveries in a single calendar year,” said Gem Diamonds’ chief executive officer Clifford Elphick.
“Production in 2018 also included a record number of diamonds greater than 20 carats being recovered in a single year,” he added.
The mine also recorded a significant reduction in its overall wastage rate, which is expected to improve its attractiveness.
“The revised mine plan results in a significant reduction in Letšeng’s overall stripping ratio due to steeper slope angles, which is expected to result in a significantly improved net present value of the mine.”
The mine also attained strong pricing in the market with an average price of US$2 131 per carat for 2018, which improved by 10 percent from the US$1 930 per carat fetched in 2017.
“Subsequent to period end, strong pricing was achieved at the first tender of 2019, with an average price of US$2 004 per carat,” the mine said.