Lesotho Mine Urges Government Help to Avoid Closure
October 23, 25
(IDEX Online) - Storm Mountain Diamonds (SMD) is warning that its Kao mine, in Lesotho, could close within weeks unless the government - a 25 per cent shareholder - provides urgent tax and royalty relief.
The government is torn between showing undue favoritism to a business in which it holds a stake, and protecting one of its key employers (around 750 workers) and revenue generators.
SMD sold around 250,000 carats in 2024, generating about $50m in sales - down from $105m in 2022 and £90m in 2023, as both demand and per-carat prices fell.
The mine, co-owned by Namakwa Diamonds Limited (75 per cent) blames the current crisis on a deadlock with the government over unresolved tax assessments and royalty payments.
SMD says it needs about $13m in new investment to keep the Kao mine - the biggest in Lesotho - operating over the next year, according to the allafrica.com news website.
In a press release the mine says it has been urging the government of Lesotho (GOL) since mid-2024 to withdraw tax assessments and to spare it the burden of royalty payments at a time when the mine is making a loss.
SMD says it has, unfortunately, not received a meaningful response on these issues.
It says: "Without GOL assistance on these issues SMD will not be able to source the investment that the mine requires to fund the capital projects that are needed to extend the life of the mine.
"Particularly, the Revenue Services Lesotho's disregard of the binding mining agreement is an impediment to further investment as investors seek a stable and predictable investment environment."
SMD argues that when the Kao project was launched, SMD and the government signed explicit "binding mining agreements."
These agreements spelled out the specific tax rules, allowable debt-to-equity ratios, and royalty terms under which the investment would be protected.
SMD claims that the Revenue Services Lesotho (RSL) is now ignoring or overruling those prior agreements - demanding higher taxes, limiting allowable debt deductions, and refusing VAT refunds.
Diamond mining contributes about 10 per cent to Lesotho's GDP and accounts for roughly 20 to 24 per cent of the country's total exports by value.
Pic courtesy Storm Mountain Diamonds.