Rich pickings for Gem Diamonds at Letšeng Mine


Herbert Moyo

BUSINESS is booming at Letšeng Mine in Mokhotlong amid revelations that the company’s revenue grew to US$167, 7 million in the first half of 2018.

This represented an 81 percent increase in revenue from the US$92, 9 million growth that the company recorded for the first half of 2017.

The United Kingdom-based Gem Diamonds is the majority shareholder at Letšeng Diamonds with 70 percent shareholding. The government owns the remaining 30 percent.

A trading update that was recently released by Gem Diamonds detailing the company’s operational and sales performance for the period from 1 January 2018 to 30 June 2018 (half year) shows that the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) were US$68, 4 million (up from US$13 million in the first half of 2017).

“The attributable profit was US$24, 2 million…and basic earnings per share (increased to) 17, 68 US cents (compared to) 0, 04 US cents in the first half of 2017,” the company said.

“The company’s cash on hand is at US$70, 5 million (up from US$47, 7 million on 31 December 2017).”

The strong performance was achieved on the back of record diamond finds during the first half of 2018 of 10 gem quality diamonds greater than 100 carats of which the largest was the 910-carat D Colour Type IIa diamond, recovered in in January.

“Record recoveries of large, high quality diamonds at Letšeng, combined with the discovery and subsequent sale of the Lesotho Legend have generated a strong financial performance for the first half of 2018,” the company said.

Gem Diamonds Chief Executive Officer, Clifford Elphick, commented, “We are pleased to report our 2018 half yearly results”.

“Letšeng’s improved recoveries combined with the discovery and subsequent sale of the Lesotho Legend has generated a strong set of results. Letšeng produced a record number of diamonds greater than 100 carats for any six-month period in the mine’s history reaffirming the exceptional and unique quality of Letšeng.

“Subsequent to June, two further diamonds larger than 100 carats have been recovered, with the latest in August marking the twelfth such recovery for the year. This now positions 2018 as a record for recoveries of diamonds greater than 100 carats in a single year.

“The market for Letšeng’s high-quality diamonds has remained robust, with an average price achieved of US$2 742 per carat during the period, up 54% compared to US$1 779 for the first half of 2017. It is also pleasing to report on the progress of the business transformation. This has already seen initiatives achieved in revenue, productivity improvements and cost savings to the value of US$47 million of the 2021 target of cash savings of US$100 million,” Mr Elphick said.

The company summarised its major operational achievements at Letšeng for the first half of 2018 as follows:

  • Recovery of the 910 carat ‘Lesotho Legend’ which was sold for US$40 million
  • Recovered a half year record of ten diamonds greater than 100 carats
  • Record rough tender revenue of US$169.2 million (up from US$88.8 million in the first half of 2017)
  • Average price of US$2 742 per carat achieved (up 54% from US$1 779 per carat in the first half of 2017)
  • Twenty-five diamonds achieved a sales value of greater than US$1 million each

There have however, been concerns that despite the huge finds, Lesotho does not realise significant revenue inflows from the sales of its diamonds.

For instance, the government only realised US$3, 2 million for the sale of the 910-carat diamond that was recovered at the Letšeng Mine in January this year.

This is despite the fact that the diamond, which has been dubbed ‘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.

Finance Minister Moeketsi Majoro told this publication in May this year that although Lesotho would occasionally make massive diamond finds including the ‘Lesotho Legend’, 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.

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