Lerala’s ‘lost’ diamonds go on sale
Mbongeni Mguni | Monday May 1, 2023 06:00
Information uncovered by BusinessWeek indicates that Hennig has been receiving registrations for the tender of the rough diamonds scheduled for April 27 to 30 in Dubai. A similar tender process will be held in Antwerp between May 4 and 10.
“Original Lerala Diamond Mine (Pty) Limited goods—over 50,000cts of original goods from the liquidation of the assets of the Botswana-based mine, in all sizes and qualities,” reads the notice inviting registrations for the auction.
Bress time, Hennig officials in Antwerp had not responded to BusinessWeek enquiries seeking further clarification on the tender. BusinessWeek sought to understand how many bidders have registered for the auctions, whether there is a reserve price or prices for the parcel and whether the parcel will be sold as one lot or as individual diamonds.
The value of the diamonds is critical as it forms part of the legal queries that have surrounded Lerala Mine since its closure in 2017 and subsequent liquidation. In 2017, when Lerala closed, the diamonds were improperly sold for $1.2 million, despite a reserve price of $3.3 million.
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 the 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.