PARAGON Diamonds says it will negotiate directly with the government of Lesotho to keep its proposed acquisition of Mothae Diamond Mine alive.
This was after the mine’s current owner, Canada’s Lucara Diamond, called off the proposed sale of a 75 percent stake of Mothae Diamond Mine due to Paragon’s failure to secure funding within the agreed timeframe. The $8.5-million (about M92.42 million) deal was inked on 14 July 2015 for the mine which is on the southern edge of the Kaapvaal Craton and hosting the diamondiferous northern Lesotho kimberlite field.
Next to Letšeng mine, Mothae Diamond Mine has an indicated resource of one million carats and an inferred resource valuation of $1 billion.
While admitting that finalising funding for the deal had taken longer than expected, in a statement released on Tuesday, Paragon said the development of Mothae was highly synergistic with its Lemphane kimberlite pipe project in Lesotho. Paragon in May 2011 acquired International Diamond Consultants, a privately-owned group of companies which held a prospecting licence over the Lemphane Kimberlite project. The subsequent exploration programme resulted in the award of a mining lease for the Lemphane Kimberlite in March 2014.
Paragon plans to develop and commence production at both Mothae and its nearby Lemphane project simultaneously, to take advantage of economies of scale and minimise costs. In the first full year of production, Paragon said earlier this year that it was targeting combined revenues of approximately US$36 million from both Mothae and Lemphane.
In the statement, Paragon said it would negotiate directly with the government of Lesotho, which controls the definitive approval on any transaction in respect of developing Mothae since it also has a 25 percent stake in the mine.
Paragon also stated that finalising funding for the company to implement its development strategy was still an “on-going process”. It said the conclusion of a financing package took longer than anticipated because of the company board’s reluctance to materially discount the potential value of the company and dilute existing shareholders, as well as continued administrative delays experienced by the expected investor.
“It is the Board’s belief that the termination of the agreement with Lucara will not have material impact on the terms of any such funding obtained from the afore-referenced investor,” the statement read.