Firestone Diamonds’ 75 percent-owned Liqhobong Mining Development Company (LMDC) has signed a revised mining lease agreement with the Lesotho government.
It said in a statement emailed to Rough & Polished that the revised mining lease agreement represented an “important milestone” for Firestone and it was looking forward to shortly commencing construction of the Main Treatment Plant and supporting infrastructure at the Liqhobong diamond mine.
“The negotiations have been extensive and we believe that the concluded agreement is positive for all parties,” said company chief executive Stuart Brown.
"Importantly, the Revised Mining Lease Agreement enables the company to proceed with its fundraising, a considerable private investment in Lesotho, and commence construction of the Main Treatment Plant and supporting infrastructure at Liqhobong.”
Under the new agreement, LMDC would mine diamonds at the Liqhobong diamond mine for an initial period ending on 30 June 2021, with the ability to renew the mining lease for two further periods of 10 years each.
Firestone said it had also been agreed that concessions regarding the exemption from paying withholding tax on interest and dividends contained in the previous agreement would no longer be available.
In addition to this, LMDC would also incur withholding tax on services rendered, having not been granted the exemption which the group had, until recently, anticipated receiving, it said.
“Accordingly, the obligation to pay withholding tax will increase the cash outflow during the two year construction period of the Main Treatment Plant,” said Firestone.
“In compensation for the requirement to pay withholding tax, the Lesotho Government has agreed that the royalty rate on diamond sales will be reduced from 8.0 per cent. to 4.0 per cent. from first production, until such time as LMDC has obtained benefit to the value of $20.0 million from the royalty rate reduction. Thereafter, the royalty rate will revert to 8.0 per cent. of diamond sales.”
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
