Lerala diamond offtake deal collapses
Brian Benza | Friday November 4, 2016 18:00
Alpha Capital had agreed to buy all the diamonds produced at the Botswana-based mine for a period of six months, but had failed to make payment for the first parcel, despite written acknowledgement that payment was due.
Kimberley said on Tuesday that it had 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 and Capital Diamonds was now in default.
“To date, Capital Diamonds has failed to make payment for the first parcel of diamonds it had agreed to acquire under the offtake agreement despite numerous written acknowledgements that the payment is due as well as numerous written promises from Capital Diamonds that the payment will be made without any further delay. “Lerala reserves all rights in relation to the remaining supply of diamonds under the offtake sales agreement with Capital Diamonds,” KDL said.
Kimberley stated that it would now sell the defaulted parcel of diamonds through an upcoming tender, and would start legal action against Capital Diamonds for damages and false representation.
The collapse of the deal comes hard on the heel of news of the stoppage of all pit-mining operations at Lerala, which is reported to result in job losses.
The news of the temporary cessation of all pit operations at Lerala possibly for three to four months was broken recently by a project manager at Basil Read Mining Botswana (BRMB), the company contracted to conduct mining operations at Lerala.
Basil Read said the cessation of pit mining will leave them with no option but to embark on a retrenchment exercise as it cannot afford to keep employees yet there is no income generation to pay them during the period.
Because the cessation was with immediate effect, Basil Read stressed that the retrenchment will be fast-tracked to avoid putting the company on financial crises.
Lerala restarted production in April this year after being mothballed for three years.
The mine was targeting to produce an average of 357,000 carats/year at full production and operate for seven years.
Commencement of mining operations at Lerala followed the awarding of a $47 million (P480 million) open pit-mining contract to South Africa’s Basil Read in February.
The mineral resources of the diamond mine as at December 31, 2015 was estimated as 20.1 million tonnes (Mt) at 24.2 carats per 100 tonnes (cpht) containing 4.9 million carats.