One Day, Two Closures

One day, two diamond mine closures.

News that Petra was suspending operations at its Finsch mine, in South Africa, and that Storm Mountain Diamonds was doing likewise at Kao, in Lesotho, broke on the same day, Friday 29 May.

Petra's suspension at Finsch reflects mounting liquidity pressure, weak pricing, an unfavorable product mix and a strong rand.

Storm Mountain's move at Kao shows how falling rough prices and rising operating costs, compounded by soaring fuel prices, are overwhelming smaller producers.

The coincidence of the two announcements underscores a broader reality: miners are increasingly choosing to preserve assets rather than maintain full production, because current market conditions no longer support both.

It has to be said that neither announcement came as a surprise. Petra had already sold two of its four mines and had refinanced amid significant financial and operational pressures. And Storm Mountain had already warned that Kao was under severe financial pressure.

Finsch, an underground mine in the Northern Cape, has resources of over 33Mcts and a potential life until 2037, according to Petra's own data.

But over 90% of its rough production is under 2 carats, where prices have been hardest hit by competition from lab growns.

The immediate closure, as part of a business rescue process, affects about 1,700 employees at the mine and roughly 17,000 people in the surrounding community who rely on it.

Finsch sold 943,554 carats in FY 2025, generating $70 million in revenue, down from $120 million the previous year as weaker rough prices and a stronger rand squeezed margins.

"We are faced with an unprecedentedly weak diamond market, due to global macro factors as well as the recent Middle East tensions," said Vivek Gadodia, Petra's CEO.

"In particular, we continue to see deterioration in the value of the smaller sized diamonds, where we do not currently expect a material near-term recovery."

The average price for Finsch rough at tenders in April and May was just $47 per carat.

Meanwhile Kao, a high-altitude kimberlite mine in northern Lesotho's Butha-Buthe district, has been under severe strain for a long time from weak diamond prices. And in recent months from a sudden doubling of its monthly fuel bills, to almost $1.3 million.

Closing the mine on 30 June means almost all 750 workers, both permanent employees and contractors, will be retrenched.

Storm Mountain sold around 250,000 carats in 2024, generating $50 million in sales - less than half of its 2022 revenue of $105 million.

"The dominant factor is the prolonged and severe decline in global rough diamond prices," said Storm Diamonds CEO Neo Hoala.

"The prices we currently realise for our diamonds fall substantially below the cost of all required to simply cover the cost of ongoing SMD mining operations, and this gap has widened significantly over the past four years with no meaningful signs of recovery on the horizon."

The bigger picture is no less bleak. Ekati, in Canada, has filed for insolvency protection, and has reduced mining activities.

Ekapa, in South Africa, has halted operations and is up for sale and Koidu has closed its mine, the biggest in Sierra Leone. Both are in response to the weak market for natural diamonds, rather than planned end-of-life closures.

Is there a glimmer of hope?  Both the Finsch and Kao closures are being framed as temporary measures, which leaves open the possibility of them resuming operations if and when diamond prices recover and financing improves.

"Lesotho's diamond industry has endured difficult periods before, including the COVID-19 era, and emerged with its reputation for producing world-class stones intact," said Ms Hoala.

"We believe it can do so again should market conditions allow."

That's very circumspect. Markets may be stabilizing, to some extent, and sentiment may be recovering.

But we're yet to see evidence of a real, robust rebound.

Have a fabulous weekend.