The day the stones stopped shining
Onalenna Kelebeile | Friday June 16, 2017 17:12
SELEBI-PHIKWE: Employees of Lerala Diamond Mine, who were last week placed on payable leave following the suspension of operations, will have to wait for a forthcoming sale of diamond inventory to know whether they will receive their May salaries.
The mine, owned by Australian firm, Kimberley Diamonds, shut its doors abruptly recently, after failing to secure further funding for operational capital.
On Monday the close to 200 workers rendered jobless, gathered at a playground near the mine, pondering what to say to their landlords.
Some recalled the mysterious P1,000 advance they had received a day before management ordered them all out, locked the premises and handed the keys over to security guards.
Lerala Mine is now experiencing its third closure since it started operations in 2008. This time the explanation is that critical funding that was expected from major Chinese financiers about a month ago has not been effected despite Kimberley’s efforts to push for it daily. In the absence of any confirmation from the financiers, the mine decided to suspend operations and send employees home.
On Monday, mine management, representatives from the Botswana Mine Workers Union and the Department of Labour, met with the workers at the playground where a letter from a director, Laila Green was read out.
Writing to Mineral Resources minister, Sadique Kebonang, Green said the mine could not continue to incur more debt without confidence that funding would be forthcoming “in a timely manner”.
It was explained to employees that Kimberley Diamonds is unable to generate sufficient funds to support its ongoing operations in Lerala and has notified the mine that it has withdrawn its support and will no longer be providing further financial support.
In light of the withdrawal of the financial support, Lerala undertook a review of the mine’s present financial position including an analysis of potential courses of action available. Hence they decided to place Lerala Diamond Mines under judicial management with the possibility of winding up the mine.
The company has engaged Armstrong Attorneys with respect to the liquidation proceedings in this regard are expected to start as soon as possible.
A mine official, Spencer Kaisara, told workers that a potential buyer for the diamond inventory was being sought.
“We valued the diamonds as the company and government is expected to do its own valuation. If any potential buyer offers below what government has put on the table then the diamonds cannot be sold. This is beyond anybody’s control and May salaries are dependent on the sale of those diamonds.”
According to Kaisara, if the diamonds are not sold by the time the fate of the company is decided, they will become part of whatever route would be deemed necessary between liquidation and judicial management.
Employees were also told that Lerala Diamond Mine has placed 3,800 carats of diamonds in the custody of Henning International and that the company no longer has control of those diamonds except for the rough ones that are at the Botswana Diamond Hub for valuation and sale to a potential buyer for payment of May salaries. “If they are not sold then salaries are going to delay,” Kaisara said.
He added that Armstrong Attorneys will decide soon on whether the mine should be placed under judicial management or an application made for final liquidation.
“We do not have even a single cent as Lerala Mine and now the parent company has withdrawn its financial support. We are going to push so that the attorneys attend to the issue as soon as possible,” he told workers at the playground.
Employees were informed that they legally remain under the employ of Lerala Diamond Mine until they are informed in writing on any options the attorneys decide upon.
It is also expected that the attorneys will have decided on whether employees will also get their June salaries or not by the 15th of this month.
As Kaisara addressed them, workers wondered aloud how they would be contacted about developments, as they head to their respective villages.
“We want msinister Kebonang here not just a letter from him, so that he can appreciate the dilemma that we are in. We do not even have money to travel home,” one employee said.
In a letter dated June 2, Kebonang told Lerala Diamond Mines that whatever decision, the company’s assets have to be preserved for the benefit of the creditors as well as shareholders. He said if the company is to be liquidated then its assets would be used to pay creditors in their preferential order. “As you may be aware, in the ordering of creditors, after secured creditors come employees who are owed wages, salaries and other emoluments. Environmental obligations and tax are by law given preferential treatment before other creditors,” he stated.
He also stated that he was aware that the company has placed 3,800 carats of rough diamonds under the custody of Henning International. “I therefore implore you to ensure that the diamonds are preserved and not passed to the custody of anyone else other than a duly appointed judicial manager or liquidator,” he wrote.
Kebonang said this was for the purposes of ensuring that the rights of employees and other creditors and shareholders are protected. “We also implore that the diamonds must only be sold for purposes of first paying employees, environmental obligations for care and maintenance and other preferred creditors,” he stated.
Kaisara told workers that Chinese financiers are expected to tour the mine on Monday.
“The Chinese are still waiting for visas to come and see the mine because they have made it clear that they can only release funds after visiting the it,” he said.
Meanwhile, the Botswana Mine Workers Union has not taken the suspension of Lerala Mine operations lightly. The closure took place on the day the union was supposed to sign collective labour agreements with Lerala. The parties had already signed a recognition agreement.
BMWU president, Jack Tlhagale said Kebonang should not be seen to be “falling into a trap”, but instead must question the closure plan and why the company has no funds.
“In his letter he is not interrogating the mine but just accepting the status quo. He must put up a team to investigate if the mine has the right reasons to close and whether government regulatory instruments on mine closure were followed,” the veteran unionist said.
He added that there seem to be no government control in Kebonang’s letter and stressed that government as a regulator must look at key things to be done before closure and to ensure a plan is in place. The union is arguing that the process of closure at Lerala is a “clear violation” of the Mines and Minerals Act, which states that mines must seek permission to close from the minister who must scrutinise the request to establish if it satisfies government’s requirements.
“What is the role of government if there is no strong intervention from her part? This shows that any mine can just close if it so wishes. Government must be seriously concerned because it gets royalties from these mines. It must make the company feel pressure and demonstrate that it has the right to withdraw the mining licence,” he said.
Tlhagale expressed concern that with the company’s accounts based abroad, government would have difficulty monitoring its finances or auditing them.
Lerala Mine is the fourth mine to close down in Botswana in the past two years. The mine opened for the first time in 2008 under the ownership of DiamonEx from Australia before being taken over by Mantle from the United Kingdom. Kimberley Diamonds took over in 2013.