Mining firm sues LNIG for M65 million


Moorosi Tsiane/Mohalenyane Phakela

DIAMOND mining company, Storm Mountain Diamonds (PTY) LTD, has sued the Lesotho National General Insurance Company (LNIG) for allegedly refusing to compensate it for losses incurred when it was forced to halt production during the hard lockdown in 2020.

The company wants M65, 9 million as compensation for loss of production and earnings.

The company says it had to stop production and consequently lost earnings. This is after the government imposed a hard lockdown in 2020 as part of measures to fight the Covid-19 pandemic.

In its court papers filed a fortnight ago, Storm Mountain Diamonds, which operates the Kao Mine in Butha-Buthe, argues that it ought to have been compensated by the LNIG to the tune of M65 997 270, 00 for the alleged loss of earnings when the country went on a strict lockdown which forced it and other companies to close in 2020.

It argues that it ought to have been compensated by LNIG as its insurer in terms of the Assets All Risks Insurance Policy Agreement the two parties entered into. It does not say in its court papers when the agreement was entered into.

The agreement was meant to compensate them for losses resulting from the halting of production due to an outbreak of diseases including Covid-19, the mining company argues.

“On or about March 2020 and continuing thereafter, there was an outbreak, alternatively an occurrence of Covid-19 at or in the vicinity of the premises of the plaintiff,” Storm Mountain Diamond state in its court papers.

“On a proper interpretation of the Policy Agreement, cover under the Infectious Diseases clause includes cover for losses caused by measures put in place by the Lesotho government in response to Covid-19.

“On 27 March 2020, a state of emergency was declared in Lesotho under Legal Notice No 26 of 2020 and was deemed to take effect on 18 March 2020. In terms of the Public Health (Covid-19) Regulations 2020, promulgated as part of the government of Lesotho’s response to Covid-19, a lockdown was put in place from midnight of the 29 March 2020 to midnight of the 21 April 2020. During the lockdown period, all businesses were required to cease operations except for any business or entity involved in the manufacture, supply or provision of essential goods and services.”

Storm Mountain states that it incurred additional operational costs in order to implement Covid-19 safety measures which included the provision of personal protective equipment (PPE). It also incurred Covid-19 testing costs, the court papers state.

“Mining activities were permitted to commence again with effect from 27 April 2020, and Storm Mountains Diamonds was able to safely start up the mine on or about 7 June 2020 and only reached full production capacity on or about 30 June 2020.

“As a result of the stoppage in the mining operations and ramping up of the operations thereafter, Storm Mountain Diamonds could not produce and sell the diamonds that it would have had had the outbreak of Covid-19 and the authorities’ response thereto not occurred. Furthermore, the plaintiff incurred necessary increases in its cost of working to deal with Covid-19, including the provision of personal protective equipment and Covid-19 testing costs.

“As from 29 March 2020 and until approximately 15 June 2020 the Mine was not operating and had to be placed on care and maintenance. The plaintiff had to carry the costs of keeping the Mine on care and maintenance during this period.

“The plaintiff took whatever reasonable measures that it could to mitigate against the losses that it was suffering. On or about 6 June 2020 the Mine started production and this was ramped up so that by approximately 30 June 2020 the Mine was back at full production.”

But by the time they were allowed to resume production, the damage had already been done, the company argues.

“But as a result of Covid-19 and the response of the authorities thereto, the plaintiff was unable to mine or process diamonds at full capacity from 29 March 2020 to 30 June 2020, resulting in a loss of diamond production and accordingly a loss in a turnover and profits. The Mine was unable to process its planned tonnes of ore and lost approximately 985 020 tonnes of ore production, at an average grade of 4, 4 carats per hundred tonnes, resulting in a loss of approximately 43 689, 6 carats in diamond production.

“The loss of 43 689, 6 carats in production, at an estimated sales price of US$ 260 per carat, resulted in a loss of revenue of US$ 11 359 296 or M189 840 318 at an exchange rate of M 16, 71 to US$1. This resulted in a loss of gross profits of M 57 997 270.”

Due to its losses, the company wants compensation from LNIG.

“The Plaintiff suffered a loss of gross profit for the period 29 March 2020 to 30 November 2020 in the amount of M 65 997 270 comprising a reduction in revenue/profits,” the mining company argues.

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