LUCAPA Diamond Company Limited’s preparations for the commencement of full scale diamond mining at its Mothae Mine in the second of half of this year has received a massive boost after the company secured major investment backing worth A$16.5 million (US$12.67 million).
In a statement to the Lesotho Times this week, the Australian-based company said the funding package had been secured from a “new cornerstone investor and existing shareholders”. It will “provide a working capital buffer for the high-value Mothae Diamond Mine development and early bulk sampling programme in Lesotho which remains on budget and on schedule for commercial production in the second half of 2018”.
Mothae Mine is located close to the Letšeng Diamond Mine in Mokhotlong and it was put up for sale by the government in February 2016 after a prospective buyer, Paragon Diamonds Limited, failed to secure the requisite funding within the given time frame.
In April 2017, the government awarded mining rights to Lucapa Diamonds to develop the mine which had been idle since 2015.
Company documents previously seen by the Lesotho Times indicate that the trial mining at Mothae produced more than 23 000 carats of diamonds with sales exceeding US$17 million.
This led Lucapa to draw up a development plan in October 2017, which outlines proposals to move into phased commercial production in the second half of this year.
Lucapa has so far paid US$4, 5 million out of the US$9 million it owes the government for the 70 percent shareholding it acquired in the Mothae Mine.
It was initially scheduled to pay the outstanding US$4, 5 million balance in eight monthly installments starting in October 2017. However, the government resolved to defer the outstanding payments to June this year to allow the company to channel its resources into ensuring that full scale production begins without any hitches.
Lucapa has budgeted US$17 million to commence Phase 1 of full scale mining in 2018. Phase 1 of mining will run from 2018 to 2021.
Before the latest financing injection, Lucapa secured a US$15 million financing loan to develop Phase 1 of the Mothae project.
The 2017 loan was secured from Equigold, a company associated with prominent Singaporean-based resources investor, Simon Lee AO.
The Equigold loan facility carries an annual interest rate of 13 percent and is repayable in eight quarterly payments commencing in December 2018, by which time Lucapa Diamonds expects Mothae to be in a steady state of production.
Phase 1 is expected to generate gross revenue earnings of US$79, 6 million while Phase 2 which will run from 2022 to 2031 will generate gross revenue earnings of US$697 million.
Lucapa is expected to incur royalties and marketing costs of US$5, 6 million for Phase 1 and US$48, 8 million for Phase 2.
Operating costs for Phase 1 have been pegged at US34, 1 million while those for Phase 2 have been pegged at US$307, 8 million.
In addition to the Mothae Mine, part of the latest US$12, 67 million cash injection will be used to fund Lucapa Diamonds’ other ventures in Australia and Angola.
“The Lucapa Board believes the funding package to be overwhelmingly positive for the company and its shareholders (because) it provides a working capital buffer for the high-value Mothae diamond mine development and early bulk sampling programme in Lesotho, which remains on budget and on schedule for commercial production in the second half of 2018.
“It also enables Lucapa to launch an aggressive fully-funded drilling and exploration programme at the Brooking diamond discovery (in Australia). It also positions Lucapa to be a first mover in Angola as the new Angolan President (João Lourenço) seeks to attract foreign direct investment by addressing key investment hurdles,” Lucapa said this week.
Commenting further on the developments in Angola where Lucapa operates its flagship Lulo Diamond Mine, the company said that Angolan President Lourenco and his Mineral Resources minister, Diamantino Azevedo, have set the Angolan diamond authority, Endiama, a goal of doubling Angola’s diamond production to 14 million carats within four years.
“Lucapa and other diamond companies have been invited by Minister Azevedo and Endiama to discuss these positive initiatives. As such, and in anticipation of a positive outcome, Lucapa and its local Angolan partners are devising a growth strategy at Lulo to build on the successful alluvial mining operations and kimberlite exploration venture,” the company said.