‘Lost’ Lerala diamonds finally back in local hands
Mbongeni Mguni | Monday March 27, 2023 06:00
Local authorities secured a key legal victory in Brussels recently and have the stones under their control, a situation that will bring finality to the saga at Lerala where creditors had filed claims worth P30 million.
“The diamonds are still in Belgium but in the hands of people engaged by Botswana who have just started the process for selling the stones,” Minerals and Energy ministry officials told BusinessWeek.
The latest developments come after the High Court and Court of Appeal both ruled in favour of local liquidators who first raised alarm on the flight of the parcel of diamonds in 2018. A court in Belgium subsequently upheld the local Court of Appeal’s finding that the diamonds should return to the control of Botswana.
Lerala Mine, located in the Tswapong area, closed at the end of May 2017 after its Australian owner, Kimberly Diamonds, ran out of operational cash citing weak sales. At least 130 workers lost their jobs, with a few others retained for care and maintenance activities.
According to documents seen by BusinessWeek at the time, the sale of the 53,000 carats was initiated on May 28, 2017, through a company in which Kimberly’s majority shareholder held a major stake. This company was to auction the stones in Antwerp, having acquired them from Kimberly at $22 per carat, an amount creditors believe was purposefully below value as prior sales at Lerala had fetched prices of $45 per carat.
The following day, May 29, Kimberly Diamonds told its workers operations were stopping due to a lack of cash flow, resulting in 130 employees being escorted off the premises in Lerala village.
The companies involved in the sale of the diamonds appeared related, with Lerala’s former major shareholder, Alex Alexander, apparently, their ultimate beneficial owner, court documents from the time said.
While the reserve price for the diamonds was $3.3 million, Kimberly Diamonds sold them to two Alexander-linked companies for $1.2 million. After local liquidators handling the Lerala closure, raised the alarm about the transaction and its timing, the firms involved subsequently offered to pay government $100,000 in unpaid royalties and $250,000 towards workers’ packages in return for withdrawing the court case.
Liquidators dragged Kimberley Diamonds and its owner to the High Court and subsequently the Court of Appeal seeking the return of the diamonds, which count as Lerala’s assets and are required for the settlement of creditors’ claims.
Lerala Mine has had a troubled history, having shut down in February 2009 and July 2012 before Kimberly Diamonds bought it in February 2014. Kimberley kick-started production in April 2016 and recovered about 70,100 carats, before filing for liquidation in June 2017 citing weak sales, high operational costs, and lack of capital.
The flight of the parcel of diamonds set off a bitter legal battle during which Alexander at some point unsuccessfully filed and pursued a P347 million claim for loans allegedly made to the Tswapong operation. The director also faced a 20-year prison term in his home country of Australia on four counts of misleading investors in that country. In 2018, a Sydney jury acquitted Alexander of two charges and was unable to reach a decision on the other two.
Maroon Capital purchased Lerala Mine in 2020 but is yet to resume operations, an issue that has frustrated area authorities including legislator, Setlhabelo Modukanele, who queried the delay in Parliament earlier this month.
In response, Minerals and Energy minister, Lefoko Moagi said Maroon Capital plans to restart operations by first mining Lerala’s tailing dump.
“They said they want to secure funds to start with processing the tailing dump and we will be watching them carefully with the Department of Mines,” he said. “If they are unable to start, we will take back our mine and give it to those who can move it forward so that Batswana can secure jobs.”