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Liqhobong upbeat about closing financing deal

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Bereng Mpaki

LIQHOBONG diamond mine is confident of concluding a debt restructuring agreement with ABSA, which it says is crucial to its resumption of full-scale mining operations.

If concluded, the mine will suspend repayment of its US$80 000 000 debt to ABSA until September this year.

The mine has been on care and maintenance since April 2020 as a result of the Covid-19 pandemic’s negative impact on the global diamond market.

Liqhobong downsized last April sending home over 600 workers and retaining about 50 for maintenance works.

In its report for the quarter ending 31 December 2020, majority shareholder of the mine, Firestone Diamonds said positive progress has been made towards its financing obligations and with debt restructuring discussions under way.

Liqhobong mine is 75 percent owned by Firestone Diamonds while the remaining 25 percent is owned by the government.

“During December 2020, a standstill agreement was concluded between Liqhobong Mining Development Company (LMDC) and ABSA providing for, inter alia, the suspension of LMDC’s capital repayment obligations under the ABSA Facility Agreement to September 2021,” the quarterly report said.

“In terms of the standstill agreement, LMDC is still required to service interest due on a quarterly basis. Formal discussions commenced with the company’s bondholders, (Pacific Road Resources Fund II L.P, Pacific Road Resources Fund II, and Resource Capital Fund VI L.P.) and Absa Bank on restructuring the Group’s debt.

“The company has initiated a series of required work streams in this regard and appointed a specialist independent corporate adviser to advise it in this regard.”

Firestone Diamonds’ chief executive officer, Paul Bosma said they were expecting to complete the debt restructuring process during the first half of 2021.

“In addition, good progress was made on our debt restructuring process with the commencement of formal discussions with our two bondholders and ABSA, as well as the conclusion of a standstill agreement with ABSA which provides for the deferral of capital repayments under the ABSA facility agreement to September 2021 which helpfully facilitates the debt restructuring process. We anticipate concluding this process during the first half of 2021.”

According to the report, the mine sold 43 269 carats of diamonds in November 2020 realising revenue of US$3, 6 million (about M53, 4 million) at an average value of US$84 (about M1247) per carat.

“As reported previously, the company planned to split its diamond inventory (63 211 carats after cleaning) into two portions to test the market to determine the extent to which diamond values for Liqhobong goods have recovered.

“The first portion was placed on tender in Antwerp during the first week of November 2020. This portion comprised of 23 007 carats (including all special stones), and 20 262 carats of smaller run of mine (ROM) category stones which were carried over from the March 2020 sale. The sale realised revenue of US$3, 6 million at an average value of US$84 per carat.

“Values achieved for the larger, better quality diamonds were encouraging with all individually categorised parcels realising prices that exceeded the company’s reserve prices. ROM values were back to pre-Covid-19 levels and on par with the previous 6 month average. The company has 19 942 carats remaining in inventory comprising mainly smaller ROM goods which it plans to sell during the first quarter of 2021.”

The report said the global diamond sales continued to improve during the quarter with increases in sales prices being reported by major producers.

“It was further noted that during early 2021, cutters and polishers were increasing their production capacity in anticipation of stable orders in Q1 as jewellery businesses and dealers sought to replenish inventories which they sold during the December 2020 holiday season and due to anticipated market activity ahead of the Chinese New Year in February.

“The positive market trend is encouraging and the company will continue to monitor this as it prepares to sell its remaining diamond inventory during the first quarter of 2021 while working towards negotiating a sustainable balance sheet solution with its debtholders,” the report said.

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