Kimberley Diamonds Shuts Down Another Mine - Lerala in Botswana

Mining and Exploration
02/06/2017 16:37

It took only a year and a few months for Australia's Kimberley Diamonds to run another mine into the ground: two years after closing the Ellendale Diamond Mine in Australia - source of Tiffany & Co’s prized yellow diamonds - and leaving in its wake a host of unpaid workers, contractors and a fat environmental cleanup bill, it has now shut its Lerala Diamond Mine in Botswana citing weak market conditions, leaving 130 workers unemployed. Tuesday’s closure was the third time in its history that Lerala Mine has closed shop, having shut down in February 2009 and July 2012. Unionists told local newspaper Mmegi Online that the company’s Australian owners, Kimberley Diamonds, had simply ordered the mine shut without paying workers their May salaries. It has also seemingly shut down its website.

Mmegi cites reports describing a scene of chaos as scores of workers scrambled to source funds to move out of the mine compound, or out of the rented accommodation in the village. Landlords were reportedly holding onto former workers’ assets, locking these in their former homes and demanding outstanding dues. Botswana Mine Workers Union national organising coordinator, Abel Buka told Mmegi that Kimberley had briefed workers in a letter that it was closing operations after failing to agree a funding deal with a Chinese financier. “The general manager engaged Kimberley on May 29, four days after workers were supposed to receive their salaries and he was told that the company had no money, so just close the mine and send the workers home,” he was quoted as saying. “This is not done in Botswana, where you just say a mine is closed,” Buka said. “Our concern is that there has been no proper process followed."

The Diamond Loupe reported in July 2015 that the board of diamond miner Kimberley Diamonds had approved the restart of mining activities at the Lerala mine after securing A$14.6 million (US$10 million) from Zhejiang Huitong Auction Co Ltd to bring the project into operational readiness, having targeted an annual output of 360,000 carats over seven years. At the time, Kimberley Diamonds had been in the news for its Ellendale mine debacle, which left hundreds of workers and contractors unpaid, left the State government to clean up its environmental legacy and was almost certain to put a host of unpaid contractors out of business. We also noted the strange timing of the Ellendale closure announcement, just one day after the announcement of its re-commissioning of the Lerala Mine, stating, "One has to wonder if the company will actually get its Lerala mine into production, and if so, will the end result be like Ellendale – leaving a trail of destruction behind, while covering its own assets. Small cap resource investors are forewarned."

Nonetheless, Kimberley Diamonds commenced production at Lerala in May 2016, raised another $4 million in June 2016, held their first sale at the end of June and a second in September before they had to suspend operations in October, resulting in job losses at Basil Read Mining Botswana (BRMB), the company contracted to conduct mining operations at Lerala. Around the same time, Mmegi also reported that Kimberley Diamonds was looking for a new buyer for its diamonds from Lerala Mine after an offtake sales agreement with Alpha Capital fell through. Alpha Capital had agreed to buy all the diamonds produced at the Botswana-based mine for a period of six months, but failed to make payment for the first parcel. Kimberley issued Alpha Capital subsidiary Capital Diamonds with a default notice for the first parcel, requiring the company to make payment no later than October 28. No such payment was received, Capital Diamonds went into default and Kimberley Diamonds planned to start legal action against Capital Diamonds for damages and false representation. Somehow, production picked up again as late as December 2016. After that ... crickets. Without word from the miner, we can only assume that despite their best intentions, a series of unfortunate circumstances left them with no option but to close shop.