Meso Diamonds, a subsidiary of London-based Paragon Diamonds Limited, on Monday finalised the terms and conditions of its 10-year mining lease agreement with the government of Lesotho for the Lemphane kimberlite pipe concession.
The agreement allows the company to initiate preparations for, and commence, stage one production at Lemphane, targeting 500 000 tonnes of ore per year with estimated recovery of 10 000 carats per year at a minimum average value of US750 per carat, according to Paragon.
Meso Diamonds holds the entire lease; Paragon owns an 85-percent share in the junior company and local Basotho shareholders have a 15 percent stake.
Under the terms of the mining lease, Lesotho will now hold an interest of 20 percent in the project and 10 percent of the project interest held by the government will be free-carried with the other 10 percent to be funded by the government through its share of the project’s dividends.
There are provisions to maintain a 15 percent local Basotho share-holding arrangement on the project. An initial royalty of four-percent will be payable to the government on production and is subject to review within five years. The lease is renewable in accordance with the Mines & Minerals Act of 2005 for a further three consecutive 10-year periods.
Martin Doyle, the chairman of Paragon Diamonds, said: “We are delighted that the terms of the mining lease for Lemphane have now been finalised. Having previously recovered stones of up to 8.90 carats with values in excess of US 2 400 per carat, we have already demonstrated Lemphane’s potential to yield large high-value diamonds.
“We are now advancing our planning for stage 1 production. As well as generating significant revenue, stage one production is expected to increase the average value per carat (a consequence of the higher amount of tonnage mined), build on the robust economics already identified and also provide a bankable mineral resource.
“I look forward to providing further updates to shareholders as we look to establish Lemphane as another world class diamond mine in Lesotho.”
The company now expects to conclude advanced stage negotiations on financing stage 1. The funding is meant to cover the entire development costs of stage 1 as well as providing initial working capital.
Paragon Diamonds was incorporated on April 27 2010 and subsequently listed on the Alternative Investment Market — a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the main market. In May 2011, it completed the acquisition of International Diamond Consultants, a privately-owned group of companies with diamond explorations licences in Lesotho, Botswana and Zambia.
In addition to its kimberlite project in Lesotho, the group was subsequently awarded a further exploration licence in close proximity to its existing operations.