Only one company paying full diamond royalties

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Ntsebeng Motsoeli

ONLY one of seven diamond mining companies operating in Lesotho is paying the full statutory 10 percent royalties to the government for each diamond recovered, the public accounts committee (PAC) has heard.

The Commissioner of Mines, Pheello Tjatja, and the principal secretary in the Ministry of Mining, Ntahli Matete, made the revelation during their recent appearance before the PAC.  They said the law was now being amended to ensure that every miner pays the full 10 percent royalty stipulation.

Mr Tjatja said of all the players in the diamond mining sector, only Lemphane Diamonds Mine paid the full amount of royalties stipulated in the law while Letšeng Diamonds and Kao Mine only paid eight percent and six percent respectively.

He said Mothae and Gem Stone mines in Mokhotlong paid five percent royalties while the Kolo and Liqhobong mines each paid four percent.

Mr Tjatja was, however, quick to point out that there was nothing illegal about the diamond companies paying less than the full amount as they had been allowed to do so by the mining ministry in terms of the Mines and Minerals Act of 2005. The government nevertheless wanted all miners to pay the full 10 percent.

Section 59 of the act provides that the government should receive 10 percent royalties on the market value of each diamond and other precious stones. The act also prescribes three percent royalties for other minerals and mineral products.

Royalties are due whenever the diamonds are sold.

However, as Mr Tjatja pointed out, Section 60 of the Mines and Mineral Act of 2005 gives the Minister of Mining the discretion to allow diamond mines to pay less than 10 percent in royalties.

“Section 60 gives the Minister of Mining the power to decide whether or not to lower royalties when a mining company makes such an application,” Mr Tjatja said.

“This is part of the incentives that mining companies get for operating in Lesotho. These incentives can be scrapped once the companies have recovered the costs of setting up their operations.

“The use of the minister’s discretion is based on the public interest. The public interest is to have as many mines as possible for job creation and revenue collection. There are at least 400 kimberlite deposits in the country that could be prospected for commercial mining,” Mr Tjatja said.

However, the PAC was also told that the Ministry of Mining was working on amending the Mines and Minerals Act to ensure that the government received the 10 percent full royalties from all mines at all times.

Lesotho’s diamond sector has hit international headlines regularly because of its remarkable finds.  Some of its valuable finds have achieved the highest US dollar per carat rates of any kimberlite mine in the world.  Letšeng Diamonds regularly produces diamonds of outstanding size and exceptional colour and to date, Letšeng has produced five of the 20 largest rough white gem diamonds on record.

In August 2011, a 550-carat white diamond, the Letšeng Star, was recovered and is currently ranked as the 14th largest white diamond ever recovered. Other famous Letšeng diamonds include the 601-carat Lesotho Brown discovered in 1967 and the Star of Lesotho a spectacular white diamond of 123 carats, recovered in October 2004, days before the official re-opening of the mine.

Others are the 603-carat Lesotho Promise recovered in 2006, the 493-carat Letšeng Legacy discovered in 2007, the 478 carat D colour white diamond christened Light of Letšeng discovered in September 2008 and the 550-carat Letšeng Star discovered in August 2011.

Letšeng also discovered the 910-carat Lesotho Legend in January 2018 that was sold for a staggering US$40 million (M520 million) at an auction in Antwerp in Belgium in March last year.

However, despite these impressive finds, Finance minister Moeketsi Majoro has complained that the government is not getting much in both dividends and royalties.  He told the Lesotho Times in an exclusive interview last year that the government had obtained only US$3, 2 million in royalties from the sale of the Lesotho Legend. The government would have received US$4 million had Letšeng paid 10 percent instead of eight.

Mining companies, which have spoken on this matter in the past, have equally complained that they face high production and operational costs. These had to be factored in first before the issue of dividends was considered.

 

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