Lesotho: Liqhobong Rakes in U.S.$10,6 Million From First Quarter Sales

30 October 2019

LIQHOBONG Diamond Mine realised US$10, 6 million from the sale of 168 612 carats worth of diamonds in the first quarter of its 2019/2020 financial year which ended on 30 September 2019.

This was revealed by the company's majority shareholder Firestone Diamonds who also said that the figure represented a substantial decrease from the US$12, 7 million realised from the sale of 177 521 carats in the fourth quarter of the 2018/18 financial year.

The company also bemoaned the power interruption that has affected operations since 1 October 2019, saying this is expected to result in the loss of a month's production as plans are currently underway to resume operations during early November.

Firestone Diamonds is a United Kingdom-based company, which trades on London's Alternative Investment Market (AIM). It has 75 percent shares in the Liqhobong Mine and the remaining 25 percent stake is held by the government.

Firestone began full scale commercial production at Liqhobong on 1 July 2017 and its largest find to date is a 134-carat light yellow gem which was recovered in October 2017.

A fortnight ago the mine reported that it was M2, 5 million in potential revenue daily because of power interruptions.

The company's Acting Country Manager, 'Mamosa Matela, said voltage fluctuations that have dogged the mine since the beginning of this month have cost the mine and its employees dearly.

She said the company has been forced to lay off 563 of its 643 workers as a result.

The power interruption started when the Lesotho Electricity Company (LEC), started supplying the mine with electricity imported from South Africa's ESKOM.

This after the mine's normal supply from the 'Muela Hydropower Station in Lesotho was stopped to allow the Muela station to undergo a two-month maintenance programme starting from October 2019.

Paul Bosma, the Firestone Chief Executive Officer, said, "The first quarter performance was again solid from an operational perspective".

"However, from a market perspective, pricing remains subdued. The company continues to engage with its debtholders to ensure it can sustain operations through the current downturn and further announcements in this regard can be expected in due course.

"The recent power interruption is an unexpected setback for the company but we are doing our utmost to limit the negative impact on production by renting generators to get operations up and running again until the grid power is back online and stable. We will advise on any adjustments to guidance in future quarterly updates.

"In addition to the loss of revenue, the company has continued to incur fixed operating costs of approximately US$1, 8 million during October. The company is working with its insurance broker to assess the extent to which the interruption is covered by its business interruption policy.

"The December tender has been cancelled due to fewer carats being recovered as a result of the power outage and consequently the company's next tender will take place in January 2020. The loss of revenue and higher operating costs will impact the company's cash balance and together with the impact of a weaker diamond pricing environment, has placed further focus on finding an interim solution regarding its indebtedness with ABSA bank and the bondholders, who both remain actively engaged," Mr Bosma said.

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