Paragon: Speedy resolution in everyone’s interests
THIS article, “Ultimatum for diamond mine” ( Lesotho Times, January 14, 2016), has been noticed by a lot of Paragon Diamonds Limited investors and has brought to light a lot of unanswered questions regarding what has been going on with the Mothae acquisition.
When Paragon’s Executive Chairman, Philip Falzon Sant Manduca, took charge he came with a vision of creating a new kind of Diamond company, one which would turn Paragon into a major player and protect companies value. He had 4 immediate goals…. 1) Protecting company value 2) Acquiring Mothae 3) Funding and 4) To commence mining ASAP. The way this has unfolded has left myself and many other private investors very upset but after reading this article I can understand what has happened.
Funding for Lemphane was never going to be easy, but by acquiring Mothae that would have required more funding but easier to acquire due to the scope of the mining. What we as private investors were told was that new mining machinery was required to yield better quality diamonds without breaking the bigger stones so I understand why older redundant machinery was sold. Mr Manduca stated that acquiring machinery for two mines at once would be cheaper than acquiring machinery for two mines separately so we understood why he hadn’t started on Lemphane straight away. What we weren’t aware of was that Paragon was contractually obligated to start mining Lemphane earlier. If the Minister and Paragon had not come to an arrangement, I can then understand the bad faith the Minister views Paragon with. The Minister’s priority is to ensure that the country’s interests are looked after and that the Basotho people are given jobs and security that this brings…. especially now that it looks like the real recession is about to hit the world.
The global markets are about to crash and anybody with a bit of sense would have known that a massive recession was on its way. Hence the reason why funding has been hard to come by. Now Paragon has had her trading suspended to protect her against hostile takeovers and delisted due to this which the shareholders are not happy about but understand why.
But what we are not happy about is how negotiations have taken place. There seems to be some miscommunication between Paragon and the Lesotho government.
Paragon has according to the above mentioned article failed to contractually start mining Lemphane. This has meant a failure to create immediate jobs for the local Basotho people and text messages are very unprofessional. I can understand why the Minister is upset because Paragon so far has failed to show the Minister that it is going to look after the interests of the Basotho people.
I can also understand most (minus one or two things) why Paragon has done what it has. Generating finance right now is an absolute nightmare in Europe especially for a sector that will be hard hit by a massive global recession ie: diamonds. But if t Paragon can mine Mothae and Lemphane at the same time then Mr Manduca will be able to build the company he seeks to build which will thrive even in times of recession unlike other diamond miners.
At the end of the day, we all want the same thing. We all want mining to commence immediately at both mines generating income for Lesotho and Paragon. As a native of South Africa, I want jobs and infrastructure for southern Africa especially in this volatile recession climate.
If Paragon is allowed to mine both mines this will create another strong mining company in Lesotho creating strong competition with the likes of Gem diamonds which would be favourable to the government rather than a small monopoly. Also should a recession kick in soon other miners will need to cut costs firstly with job cuts, Paragon on the other hand will immediately be creating and maintaining jobs ensuring incomes for the local populations. And then obviously investors like myself from South Africa will maintain our interests in a company that will benefit southern Africa.
I personally believe, that if Paragon has finally got the money and can transfer it, Mr Manduca and the Minister need to meet face to face in the traditional man to man format, put away any gripes, apologise for all misunderstandings, offer new assurances (even be it bonuses to the local communities for loss of income, because surely a Minister who can organise his people jobs and a starting bonus would become a legend) and just get this deal signed so we can get to business, create jobs and start mining. Prolonging this any further will only cost income for everyone involved.