Govt gives diam di­a­mond mine ul­tim ul­ti­ma­tum

Trans­fer US$12 mil­lion to Le­sotho in two weeks or lose li­cence, says govt

Lesotho Times - - Front Page - Lekhetho Nt­sukun­yane

Govern­ment has given Paragon Di­a­monds Lim­ited a two-week ul­ti­ma­tum to ei­ther de­posit US$12 mil­lion (about m180 mil­lion) into its Le­sotho bank ac­count or lose its Lem­phane min­ing li­cence.

the United King­dom-based com­pany was awarded the li­cence in march 2014, but is yet to start min­ing op­er­a­tions due to lack of funds.

the com­pany needed to raise at least US$100 mil­lion be­fore com­menc­ing op­er­a­tions, ac­cord­ing to its li­cence agree­ment.

Paragon even an­nounced on its web­site on 16 novem­ber 2015 that it had re­quested tem­po­rary sus­pen­sion in the trad­ing of its shares pend­ing clar­i­fi­ca­tion of its fi­nan­cial po­si­tion.

the an­nounce­ment read: “Paragon cur­rently has lim­ited work­ing cap­i­tal and un­til a fund­ing pack­age has been se­cured, there is ma­te­rial un­cer­tainty over the fi­nan­cial po­si­tion of the com- pany. the Di­rec­tors of Paragon re­main in ne­go­ti­a­tions with pos­si­ble fund­ing providers to se­cure fi­nance in or­der to com­plete the ac­qui­si­tion of mothae (mine in mokhot­long), pro­vide de­vel­op­ment fund­ing for Lem­phane ( in Butha-buthe) and re­pay short-term debts in­clud­ing the £500,000 loan fa­cil­ity which is due on 18 novem­ber 2015.”

But ac­cord­ing to min­ing min­is­ter Le­bo­hang thotanyana, Paragon was given 24 months end­ing march 2016, to de­velop Lem­phane but ap­peared to lack the ca­pac­ity hence the ul­ti­ma­tum.

“Paragon has ac­tu­ally breached its con­tract w with the Govern­ment of Le­sotho by fail­ing to de­velop Lem­phane mine since the awardingawa of the ten­der 22 months ago. I can t tell you they have done zero; ab­so­lutely not noth­ing in line with the con­tract of de­vel­opin de­vel­op­ing the mine,” mr thotanyana told the Le­sothoLe­soth Times this week.

the min­is­ter said by now, P Paragon was sup­posed to have mined three m mil­lion tonnes of ore from Lem­phane, provid pro­vided “size­able” em­ploy­ment to Ba­sotho and d de­vel­oped the area to im­prove the liveli­hoods of lo­cal com­mu­ni­ties, as per the con­tract. In fact, mr thotanyana s said the Govern­ment should have l long re­voked the min­ing rights wh when the com­pany failed to ful­fill it­sit con­trac­tual obli­ga­tions within sixsi months of be­ing awardedawar the con­tract.

“the min­ing law al­lows forf the gov­ern­mentern­men to re­voke the right­srig to any com­pa­ny­compa which fails to com­ply with the con­tract with­in­withi the first six months. For some­som rea­son, we have­hav not done thatth to Paragon.go

“on sev­eral oc oc­ca­sions in th the past, Para- gon has claimed to have se­cured funds, but failed to trans­fer the money into Le­sotho to start op­er­a­tions. We have since is­sued them with a no­ti­fi­ca­tion let­ter to say if they can­not pro­vide proof of funds by trans­fer­ring at least US$12 mil­lion in 10 work­ing days be­gin­ning to­day (mon­day), we will be left with no choice but is­sue a no­tice to re­voke the rights,” mr thotanyana said.

the Le­sotho Times saw a let­ter the min­is­ter wrote to Paragon ex­ec­u­tive Chair­man, Philip Fal­zon Sant man­d­uca, dated 5 Jan­uary 2016, in­form­ing him about the ul­ti­ma­tum.

mr thotanyana said it had fur­ther come to the at­ten­tion of Govern­ment that Paragon had even started sell­ing some of its as­sets at Lem­phane.

“We have re­alised Paragon is even sell­ing some of the ma­chin­ery at the min­ing site. this fur­ther called our at­ten­tion to do some­thing about the com­pany. We ex­pected them to use the ma­chin­ery to de­velop the mine,” he said.

mean­while, the Le­sotho Times has fur­ther es­tab­lished that the govern­ment last week turned down Paragon’s pro­posal for the ac­qui­si­tion of mothae mine. the of­fer came af­ter Lu­cara Di­a­mond Cor­po­ra­tion ceded the rights to the mine back to Govern­ment last month.

Paragon’s idea, the Le­sotho Times learnt, was to use mothae to raise cap­i­tal.

How­ever, mr thotanyana said the govern­ment turned down Paragon’s pro­posal due to the pre­vi­ous fall­out over Lem­phane.

“We are talk­ing about the same com­pany which has let us down at Lem­phane. How do you ex­pect us to give the rights of mothae to a com­pany which has al­ready failed us on the other mine it al­ready has ex­clu­sive rights to?

“Paragon has not only failed us as govern­ment, but it also failed com­mu­ni­ties around Lem­phane as well as the en­tire Ba­sotho na­tion. Paragon should have em­ployed a size­able num­ber of Ba­sotho had it com­plied with its con­tract for Lem­phane. By now, Paragon should have mined three mil­lion tons of ore from that mine. It should have de­vel­oped that area and im­proved liveli­hoods of many fam­i­lies.

“Like I said, Paragon has on many oc­ca­sions claimed to have se­cured funds to op­er­ate both mines. Ac­tu­ally, we had ap­proved Paragon to op­er­ate Mothae af­ter the com­pany was iden­ti­fied by Lu­cara as the next in­vestor when the lat­ter de­cided to leave the mine for bet­ter op­er­a­tions they had se­cured in Botswana and else­where.

“We ap­proved Paragon’s takeover from Lu­cara in Au­gust 2015, but it seemed we had opened a can of worms when we re­quested the com­pany to pro­vide proof of its fi­nances within 30 days. This was af­ter Paragon claimed to have se­cured US$70 mil­lion to op­er­ate Mothae. They brought doc­u­ments here which sug­gested that they had se­cured the fund­ing from Trade 4 Busi­ness Fi­nances. We then asked the Cen­tral Bank of Le­sotho to ver­ify this, but the bank could not ap­prove this.”

The min­is­ter said he had been re­ceiv­ing “many text mes­sages” from Paragon claim­ing to have se­cured more fund­ing, but the com­pany had not been able to trans­fer the funds to Le­sotho.

“It has al­ways proved dif­fi­cult for Paragon to trans­fer the money into Le­sotho and prove to us it has the fi­nan­cial ca­pac­ity to op­er­ate. We have since de­cided to put Mothae mine to ten­der, and Paragon can still bid for it. If Paragon out­com­petes other com­pa­nies in the process, we will not hes­i­tate to award it the con­tract for Mothae. But it should be via trans­par­ent ten­der­ing pro­cesses which we are al­ready work­ing on.”

Con­tacted for com­ment yes­ter­day, Paragon Fi­nance Di­rec­tor, Si­mon Ret­ter said: “It is true what the min­is­ter is say­ing, that we were not able to raise the money in 2015 to op­er­ate Lem­phane. It has been a dif­fi­cult year for us, and of course, for ev­ery­one in the min­ing and com­modi­ties in­dus­try, to raise cap­i­tal. We have apol­o­gised and re­spect that the min­is­ter has been pa­tient. But we fi­nally se­cured US$30 mil­lion from our in­vestors af­ter a long wait. We showed proof of such funds to the min­is­ter via bank­ing doc­u­ments, ev­i­denc­ing that the funds were now avail­able to in­vest in both mines and com­mence pro­duc­tion within four months and em­ploy over 300 peo­ple forth­with.

“All our min­ing strate­gies have been com­pleted, equip­ment or­dered and we are ready to go. Sadly, the min­is­ter dis­re­garded the proof of funds be­cause they were not in Le­sotho, re­jected our pro­posal to com­mence op­er­a­tions forth­with with­out fur­ther de­lay at Mothae in con­junc­tion with the com­mence­ment at Lem­phane, and told us to fo­cus on Lem­phane only.

“As the min­is­ter knows full well, Lem­phane is an ex­ploratory sta­tus mine, which re­quires tens of mil­lions of dol­lars for fur­ther re­search work be­fore gen­er­at­ing any net rev­enues, and is thus a less op­ti­mal com­mer­cial propo­si­tion than Mothae, both in iso­la­tion and amal­ga­ma­tion.

“Lem­phane makes more sense if amal­ga­mated with Mothae as a si­mul­ta­ne­ous grand scheme of works. Our view is that the govern­ment has the chance with Paragon, re­gard­less of our en­forced de­lays in 2015 when fi­nan­cial mar­kets were de­te­ri­o­rat­ing world­wide, to get two mines into pro­duc­tion right now and get over 300 peo­ple em­ployed within four months.”

Mr Ret­ter em­pha­sized how hard it had been to source fund­ing for the Le­sotho op- er­a­tions.

“There is no one any­where will­ing to fi­nance in the ex­plo­ration stage sta­tus at Lem­phane be­cause the di­a­mond min­ing in­dus­try is fac­ing se­ri­ous mar­ket chal­lenges in terms of the de­pre­ci­at­ing value of di­a­monds and over­all short­age of cap­i­tal. As the oil price con­tin­ues to fall, so has in­ter­est in in­vest­ing in com­modi­ties gen­er­ally and min­ing in par­tic­u­lar. The min­is­ter ap­pears to be pe­nal­iz­ing us for de­lay­ing de­vel­op­ments for Lem­phane. He is right, we did de­lay, but only be­cause we es­ca­lated our fi­nan­cial in­vest­ment am­bi­tions for Le­sotho to bring two mines into pro­duc­tion rather than just one. It took time to assem­ble the ad­di­tional cap­i­tal, which we have now done and ev­i­denced to the min­is­ter,” Mr Ret­ter added.

Mr Ret­ter said if the govern­ment could al­low Paragon to op­er­ate both Mothae and Lem­phane, the com­pany was ready to com­mence pro­duc­tion within four months.

“That way, it would save the govern­ment the time and costs of go­ing to ten­der and hav­ing to wait a long time be­fore they iden­tify the right com­pany that would then have to do the mine plan­ning which will take fur­ther time. What has the govern­ment got to lose? If we don’t come up with the money be­fore month end, the govern­ment can serve us no­tice on Mothae and with­draw its agree­ment for Mothae. But there is no com­pany, we be­lieve, that can put th­ese two mines into pro­duc­tion and em­ploy so many peo­ple as quickly as us,” Mr Ret­ter said, adding the com­pany was yet to de­cide whether it should in­vest in Lem­phane only, af­ter it was re­fused the con­ces­sion for Mothae.

Mr Ret­ter fur­ther said Paragon only sold “one small piece of old ma­chin­ery, which was of no rel­e­vance to fu­ture op­er­a­tions of the mine. We sold that small plant be­cause it was re­dun­dant to our fu­ture larger scale min­ing plans, and in the in­terim, helped to pay the salaries of our em­ploy­ees that are based in Maseru and Lem­phane. The money we re­ceived never left Le­sotho, and the equip­ment would never have formed any part of the larger plant on or­der to de­velop Lem­phane into full pro­duc­tion. We made this per­fectly clear to the min­is­ter. In­deed, we had re­ceived per­mis­sion to pro­ceed with the sale by the for­mer govern­ment.”

On sev­eral oc­ca­sions in the past, Paragon has claimed to have se­cured funds, but failed to trans­fer the money into Le­sotho to start op­er­a­tions. We have since is­sued them with a no­ti­fi­ca­tion let­ter to say if they can­not pro­vide proof of funds by trans­fer­ring at least US$12 mil­lion in 10 work­ing days be­gin­ning to­day, we will be left with no choice but is­sue a no­tice to re­voke the rights

Min­ing Min­is­ter Le­bo­hang Thotanyana.

Paragon Ex­ec­u­tive Chair­man Philip Fal­zon Sant Man­d­uca.

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