Lucara Diamond announced in November 2010 what it called “excellent” first results from the trial mining programme at its 75 percent-owned Mothae diamond mine in Lesotho.
It said at the time that it was conducting a trial mining programme to mine and process up to 720,000 tonnes of kimberlite from the Mothae pipe to gather further data on diamond grade, size distribution and diamond value information following a previously completed successful 100,000 tonne bulk sample programme.
The bulk sampling and trial mining programmes were in preparation for future commercial diamond production from the Mothae mine.
It said trial mining as of November 2010 had recovered 2,101.73 carats of diamonds from approximately 86,928 dry tonnes mined from the 'C' kimberlite domain of the Mothae pipe.
Test work demonstrated that a significant proportion of the larger diamond recoveries were Type IIa diamonds which are the rarest and most valuable diamonds in the world.
“These early results are very encouraging for the potential of the Mothae mine,” Lucara said at the time.
The company also said then that Mothae was one of the very few new diamond mines coming into production to meet the growing demand for quality diamonds.
"Mothae continues to deliver great results with the coarse nature of the diamonds being recovered. The recovery of a 53 carat type II diamond from the first 3,000 tonnes processed confirms our belief that Mothae will generate some of the rarest diamonds in the world,” said Lucara chief executive William Lamb at the time.
Care-and-maintenance
In September 2012, Lucara reported that a second auction of diamonds from Mothae, which was held in Antwerp, had brought to an end the project’s trial mining programme.
"The completion of the trial mining programme at Mothae marks a significant milestone in the project's development. We have now sold in excess of 20 000 ct of Mothae diamonds, the results of which would form a solid foundation for revenue modeling in our economic evaluation of the project,” Lamb said then.
However, Lucara went on to say that the Mothae processing facility would with the consent of the Lesotho government, be placed on care-and-maintenance while the company worked towards completing a preliminary economic assessment (PEA) of the project.
The company also said then that the PEA was well advanced and it, together with a National Instrument 43-101-compliant independent technical report, was expected to be complete in the first quarter of 2013.
In February 2013, Lucara said that it would continue to look into development options for Mothae, as the PEA indicated that the project was at present not feasible.
“This is due to the prevailing economic conditions which have put downward pressure on diamond prices, and is further impacted by significantly higher capital for infrastructure, particularly power, for this remote site,” said the company at the time.
Later in 2013, investors were told that the Mothae project would remain on temporary care and maintenance pending a decision regarding potential development options for the project.
This was the statement it repeated in its updates throughout 2014 until 22 December when it finally revealed its plans to offload the project following an extensive financial and economic review.
Offloading
Lucara said in a statement that although the resource had been proven to be diamondiferous, Mothae did not meet the “disciplined” investment criteria for its targeted return on capital and its forecast generation of long term free cash flow potential.
"Lucara has been very fortunate to have the opportunity to evaluate the Mothae asset and develop relations with the Government and people of Lesotho,” said Lamb.
“Based on our development strategy and the extensive work conducted on understanding the economics of the Mothae asset, we do not believe that sufficient shareholder value can be gained through the expenditure of current cash reserves on further assessment and development of this project.”
Lucara said it intends to report a non-cash impairment of the book value for the Mothae asset in its year-end accounts.
Current book value and estimated rehabilitation provision costs total about $21 million.
Lucara said it would continue to focus on its Botswana production and exploration assets while assessing other value accretive opportunities.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
