Debt-ridden Diamonex Mine to start operating ‘soon’
BOBONONG: The Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, says DiamonEx is expected to resume operations at its Lerala Mine soon.
Led by Fleming Asset Management Botswana (FAMB), bondholders are in the process of concluding an agreement to acquire majority shareholding in the mine and restructure the company’s debt, the minister revealed at a Kgotla meeting here last week.
When the mine ceased operating a few months ago and trading on the BSE in January, 285 people had lost their jobs. Kedikilwe said DiamonEx had failed to repay a loan of P10 million it acquired from the European Bank.
Apart from private and institutional investors, the government also loaned the company some money and it has since taken 25 000 diamond carats as security. Kedikilwe said some companies had shown interest in the mine but the European Bank had threatened legal action to recover its money first.
Negotiations were currently underway for the finalisation of key terms of a conditional agreement for the sale of 80 percent of DiamonEx shares to FAMB, which is acting on behalf of DiamonEx’s Convertible Bondholders. The company will retain a 20 percent interest in the subsidiary but will transfer its diamond exploration tenure in Colorado in the US to buyers.
DiamonEx will effect novation of all receivable loans and advances amounting to A$23 million (P115 million), which was made by DiamonEx for its subsidiary, to an entity nominated by FAMB.
Once the transaction has been completed, the company intends to seek re-instatement to trading of Diamonex shares, but this will be subject to the company having complied with all relevant exchange requirements such as its future plans and strategy for its continued operation, among others.
Choked by gloomy prospects in the diamond industry and disappointing sales late last year, DiamonEx was placed under voluntary judicial management by the High Court, leading to the suspension of the trading of its shares on the Botswana Stock Exchange (BSE) in January.
The company needed to review its financial position, and cited cash flow problems as the main reason for judicial intervention following disappointing results from its first sale of 10,613 carats of diamonds from its Lerala Mine last October. The sale only managed to achieve an average price of US$20 per carat for the whole run of the mine parcel, much less than a preliminary valuation of between US$48 and US$58 per carat.
Despite receiving the P10 million bailout from the government in November last year in a bid to keep its Lerala Mine afloat, DiamonEx has become the second major casualty in Botswana’s mining industry to be affected by the global credit crisis following the placement of African Copper’s Mowana Mine under care and maintenance due to viability and cash flow problems.
Meanwhile, Kedikilwe told the kgotla here that there was no way the government could cut food prices because it had tried but failed. “Food prices are affected by many factors such as fuel prices and inflation,” he said.
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