Govt stake in Lerala Mine takes knock
Brian Benza | Wednesday June 4, 2014 16:48
Appearing before the Public Account Committee (PAC) last week, Permanent Secretary in the Ministry of Minerals, Energy and Water Resources, Boikobo Paya said the value of the stake in Kimberley is now worth around P10 million as the shares have shed value on the stock market.
In 2007, the government of Botswana invested P15 million in Lerala Mine through irredeemable bonds, which was later converted into equity when the former owners of the mine, Diamonex Limited, folded during the 2008 global financial crisis.
Diamonex sold the mine to UK firm Mantle Diamonds in 2011 before the latter also offloaded the project to Kimberley in 2013.
“We converted the loan advanced to Diamonex into equity and unfortunately due to share price movements on the stock market, the value of that investment has gone down to about P10 million,” Paya told the PAC.
“We are hopeful that the company’s share price will rebound and we can be able to recoup our investments. But going forward, government has taken a strategic decision not to invest in such risky assets,” he said.
KDL’s share price has dropped from A$1.30 in January to a trading price of about 19 cents yesterday on the ASX.
The P15 million was sourced from the National Petroleum Fund (NPF).
Meanwhile KDL announced this week that Lerala Mine, which was mothballed by Mantle in 2012, will be reopened in the first half of next year. Initially planned for this year, the recommissioning of Lerala was postponed in April as KDL deferred a capital-raising plan and opted to concentrate on developing its Ellendale assets in Australia.
But in a turn of events this week, KDL on Monday announced that the company’s board has taken another strategic review decision to defer the development of Ellendale mine and opted to spend $15 million to restart Lerala.
“KDL has approved capital expenditure for funding the recommissioning of the Lerala Diamond Project after considering a strategic review of the company’s operations.
“The board has approved a total of A$14.7 million which includes a 20 percent contingency to fund the restart of the Lerala operation which was placed on care and maintenance in July 2012 by the former owners Mantle Diamonds Limited
The board has, for now, withdrawn the A$14.3M funding commitment it made in February 2014 to develop the Ellendale Mine which is on care and maintenance,” read the statement.
Kimberley Diamonds reported a loss of $6.9 million for the half-year ended December 31, 2013. Kimberley Diamonds had targeted yearly output of 400,000 carats annually from Lerala over the next six years.
The mine has five diamondiferous kimberlite pipes totaling 6.66 hectares, a 15-year mining licence and a 230-tonne per hour processing and recovery facility. Lerala Mine was originally expected to produce 330,000 carats annually over a 10-year lifespan.