Herbert Moyo
LUCAPA Diamond Company says it is on course to begin full scale diamond mining at its Mothae Mine in Mokhotlong in the second half of the year, amid indications that the company secured US$ 15 million funding and board approval for the refurbishment of its plant at the mine.
Mothae Mine is located close to the high dollar-per carat gem producer, Letšeng Diamonds in Mokhotlong. It was put up for sale by the government in February 2016 after prospective buyer, Paragon Diamonds Limited, failed to secure the requisite funding within the given time frame.
In April 2017, the government awarded mining rights to the Australia-based Lucapa Diamond Company to develop the mine which had been idle since 2015.
Company documents seen by the Lesotho Times indicate that the trial mining at Mothae, since Lucapa took over, had 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 this year.
Lucapa had budgeted US$17 million to commence Phase 1 of full scale mining in 2018. Phase 1 of mining will run from 2018 to 2021.
The company documents show that Lucapa have secured an additional US$15 million (M195 million) financing loan to develop Phase 1 of the Mothae kimberlite diamond mining project.
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.
In its latest report published on 29 January 2018, Lucapa states that the company has a development plan for the mine which will “deliver significant increases in kimberlite extraction, targeted diamond revenues and mine life”.
“The US$15m financing facility was secured to advance Phase 1 development of the mine, which is on schedule for commissioning in the second half of 2018.
“The Board also approved the refurbishment of the existing plant,” the company states in the report titled ‘Quarterly Activities Report for the period ended 31 December 2017.
The report also states that the company also generated revenue amounting to US$7.3 million at its Lulo Diamond Mine in Angola “contributing to total 2017 gross revenues of US$31.6 million at US$1,669 per carat – the world’s highest US$ per carat alluvial production”.
Further information obtained from Lucapa shows that the company has also benefitted from a decision by the government to allow the company to defer payment of the outstanding balance for the 70 percent stake it acquired in the Mothae Mine.
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 was initially scheduled to pay the outstanding US$4, 5 million balance in eight monthly instalments starting in October 2017.
However, the government resolved to allow Lucapa to defer payment of the outstanding balance to June 2018 to enable Lucapa to channel the resources into ensuring that all is in place full scale mining operations to commence in the second half of 2018.
The US$15 million loan funding was secured from Equigold- a company associated with prominent Singaporean-based resources investor, Simon Lee AO.
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.
Equigold has also converted the last two scheduled quarterly payments (totaling US$3.75 million) into ordinary shares in Lucapa Diamonds.
