19 August 2024 by Monyane Khau

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Liqhobong Mining Development Company will tomorrow meet with its 550 employees to discuss potential retrenchments  due to poor diamond sales in May and July 2024.

In a letter sent on August 15, 2024, Liqhobong Mining Development Company told its employees about the 20 and 21 August meetings to discuss possible retrenchments due to poor stock markets conditions.

“Consultative meetings with all staff will take place on-site on the 20th and 21st of August 2024,” read the statement signed by Liqhobong Managing Director, Rob De Pretto.

“During these meetings, we will discuss: Possible ways and appropriate measures to avoid potential retrenchments; minimise the number of job losses; alleviate or minimise the adverse effects of potential retrenchments; selection criteria for retrenchment; voluntary retrenchment; retrenchment packages (and) any other incidental issues,” De Pretto said.

The announcement comes just a month after Storm Mountain Diamonds (Kao) in Botha-Bothe, said they were temporarily stopping their processing plant from July 9 because of operational challenges.

Meanwhile, De Pretto said these meetings at Liqhobong Mining were necessary because of the poor diamond sales. In July 2024, De Pretto said the mine sold diamonds for $62.50 (M1, 124. 57) per carat, but it needed to sell them for $89 (M1, 601.38) per carat to make enough money. He further explained that in May 2024, the mine sold diamonds for even less, at $61 (M1, 097.58) per carat.

“This reflects the current fragile market conditions, which have worsened quickly over the past few months and are far below the required average value of US$89 per carat that underpinned the business case to restart the Mine in 2022,” De Pretto said.

He stated that given the current market conditions and the prolonged negative forecast, the Board of Directors of Firestone Diamonds Limited and the Company have concluded that Liqhobong cannot continue to operate as it currently is.

He explained that the very low prices for Liqhobong’s diamonds, combined with their already low costs, mean the mine is now losing money.

“If we continue without adjustment, the Company will quickly deplete its cash reserves and be forced to cease operations, with the closure of the Mine and loss of all jobs at Liqhobong.

“Operating “as is” under the current conditions—maintaining our present throughput and relying on the current diamond prices—is simply not financially sustainable,” he said.

He indicated that in response to these quickly deteriorating market and financial conditions, an urgent plan has been developed to help the Company weather this market downturn.

“This plan is focused on a reduced level of production to limit cash losses through the market downturn, avoiding mine closure (or care and maintenance), and maintaining jobs where possible.

“The plan preserves diamond resources for a time when diamond prices are higher and extends the life of the mine. Firestone, Absa, ECIC, and Pacific Road Capital are all committed to avoiding placing the Mine back on care and maintenance or closing the Mine.

“The success of this plan is dependent on many factors, including the support of Absa Bank Limited, the Company’s senior lender, and the Export Credit Insurance Corporation of South Africa (ECIC),” De Pretto explained.

He said they have engaged both Absa and ECIC, and they have expressed their indicative support, subject to conducting their analyses of the plan and their internal approval processes.

“The success of this plan also requires its immediate implementation, and the support of many other stakeholders, including employees, contractors, suppliers, and Government. In the absence of this support, there is a strong likelihood the Mine will be forced to close,” De Pretto said.

Liqhobong is one of four multinational mining companies in Lesotho, co-owned by Firestone Diamonds (75 percent) and the Lesotho government (25 percent). Firestone Diamonds raised $222.4 million to build the mine, including $82.4 million from ABSA and $15 million from a private investor. The mine resumed operations in Botha-Bothe in August 2021 after being closed for over a year due to COVID-19-related challenges.