Avoid SA’s gem mistakes, Lesotho warned

A BRAND new diamond mine high in Lesotho’s Maluti mountains would add 5% to the country’s $2bn GDP and a million carats per year of rough gems to the global market, said Firestone Diamonds CEO Stuart Brown on Wednesday, warning against repeating SA’s mistakes.

Firestone, which is traded on London’s Alternative Investment Market, would bring the R2.1bn Liqhobong mine into commercial production next month, ramping up to steady state production by June 2017, said Brown, who worked at De Beers for two decades, where he rose to become chief financial officer and joint acting CEO.

Firestone would hold eight auctions a year in Antwerp, but there was pressure from the Lesotho government to add value to the rough diamonds. However, he said, SA’s State Diamond Trader and its handling of the cutting and polishing industry offered a cautionary tale.

Employment in SA’s cutting and polishing industry has shrunk to just 300 people from 4,500 a few years ago. Industry players blame tax structures and onerous regulatory structures.

The State Diamond Trader can buy up to 10% of output from mines in SA to ring-fence rough stones for the local industry and to encourage transformation.

“They want to do the same as SA … and it’s very difficult when all you can say is that the State Diamond Trader hasn’t worked and now you want to do the same thing and create all these jobs, while SA has gone backwards. You need to avoid those pitfalls and let’s make sure we maximise revenues and put our taxes in the right place,” Brown said.

During 20 months of trial mining, Firestone has extracted 325,000 carats worth a lossmaking $29m. Firestone has not factored the recovery of very large rough diamonds in its calculation of revenue. It expects the mine to pay back set-up costs in four-and-a-half years.