Home Business Liqhobong suffers M56 million loss

Liqhobong suffers M56 million loss

by Sunday Express
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Bereng Mpaki

LIQHOBONG Diamond mine incurred a M56 million loss in the period July 2017 to June 2018.

The mine commenced full-scale operations in July 2017.

In a recent presentation made for the parliamentary Public Accounts Committee (PAC), the mine indicated that despite the operating loss, it still paid M98 million to the government. It however, has not made any payments to its majority shareholder, Firestone Diamonds.

The mine, which is located in the highlands of Buthe-Buthe district close to the highest dollar per carat kimberlite diamond mine in the world, Letšeng Diamonds; is 75 percent owned by Firestone Diamonds. Twenty-five percent is owned by the government of Lesotho.

The M98 million paid to the government comprised of pay as you earn-M26, 2 million, withholding tax amounting to M36, 2 million, royalties amounting to M32 million, value added tax amounting to M3 million and mining lease rentals of M400 000.

The mine also said it has paid M394 million to the government since 2011. This comprised of M48 million paid from 2011 to June 2014 and M346 million paid from July 2014 to January 2019.

However, despite the loss, the mine said it still achieved some notable production milestones in the first full year operation.

“During FY2017/18, a number of high value stones were recovered including our largest stone to date (133-carat light yellow that sold for US$0.9 million), our second most valuable stone to date (45 carat white that sold for US$1.2 million) and the highest dollar per carat for a stone to date (4 carat fancy pink achieved a sale price of US$112 781 per carat),” the presentation reads.

Liqhobong management recently told the PAC that the mine would have to close down operations if the government was to press for the payment of the full 10 percent royalties.

Chief Executive Officer of Firestone Diamonds, Grant Ferriman said this on 19 February 2019 while responding to PAC chairperson Selibe Mochoboroane’s question on whether or not the mine is prepared to pay the statutory 10 percent royalties for each diamond recovered to the government.

During their earlier appearance before the PAC last month, Commissioner of Mines, Pheello Tjatja and the Principal Secretary in the Ministry of Mining, Ntahli Matete revealed that only one of the seven diamond mining companies operating in Lesotho was paying the full 10 royalties of diamond sales.

Firestone Diamonds and its counterpart Kolo were said to be lowest paying mines at a measly 4 percent of the sales value of diamonds.

Mothae and Gem Stone mines in Mokhotlong were said to be paying 5 percent royalties while Letšeng Diamonds and Kao Mine only pay 8 percent and 6 percent respectively. Only Lemphane Diamonds Mine is said to be paying the full amount of royalties stipulated by the law.

Messrs Tjatja and Matete said the law was now being amended to ensure that every mine pays the full 10 percent royalty.

And during the recent PAC session, Mr Ferriman said the mine was still new has not yet realised profits big enough to pay the 10 percent sales royalties.

Mr Ferriman also said that the mine has projected to pay only up to 8 percent sales royalties and that it only be to do so after the 2023 financial year after they had fully serviced the R82.4 million and $68 million loans which they acquired to fund their full-scale operations.

He said if they were to pay the full 10 percent royalties, they would have to consider stopping operations because the figure would drive them out of business.

“If you were to asked by the parliament of Lesotho to choose between the two: to pay the 10 percent royalties or to close the mine, what will you go for?” Mr Mochoboraone asked.

Mr Ferriman said that he would have to speak to his principals for the appropriate answer.

When Mr Mochoboroane pressed for an answer Mr Ferriman responded: “I suspect the 10 percent royalties would make it uneconomically viable for us”.

“We wouldn’t be in a position to continue. We would be forced to close. Closure of the mine is something we would have to consider,” Mr Ferriman said.

Meanwhile, Liqhobong diamond mine has announced recovery of a 70-carat white diamond early this month.

The mine, which has the largest estimated resource capacity of 950 000 million carats, said the stone is expected to be sold in March this year.

“Firestone Diamond plc is pleased to announce the recovery of a 70-carat white, makeable diamond from its Liqhobong Mine in Lesotho. This follows after a 46-carat gem diamond that was recovered in December, sold for more than US$1 million at a recently held sale. The 70-carat diamond was recovered undamaged and will go on sale at the next tender which is scheduled to take place during March 2019,” a statement from the company reads.

The company said further details will be included in the third quarter production update.

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