Close to 60 companies, amongst them the Botswana Unified Revenue Services (BURS), Botswana Power Corporation (BPC), AON Botswana, Botswana Red Cross, Sunday Standard Newspaper as well as Collins Chilisa Consultants might not be able to recover thousands of US dollars owed to them by Lerala Diamond Mine (PTY) Limited.
The diamond mining company recently made an urgent application before the Gaborone High Court for the provisional windingÔÇôup saying it had reached a point where it was “commercially and factually insolvent” and was unable to pay its debts as contemplated in section 368 (C) of the companies Act.
The Director of the Mine, Spencer Kaisara, told the court that Learala mine is at a point where it is unable to generate any income with which to discharge liabilities and debts currently outstanding.
A list of creditors that Sunday Standard is in possession of shows that the government revenue agency ÔÇô BURS is owed over US$470 as withholding tax, whilst its power utility counterpart ÔÇô BPC is owed US$ 5 199.58, Botswana Red Cross US$3 575.23, Collins Chilisa Consultants US$2 629.19 whilst one of the leading local newspapers Sunday Standard is also owed US$1247.42. The total liabilities of the company has been pegged at US$ 3 176 819.78.
Part of its debts includes May 2017 salaries for its former employees which totals just over US$183 thousand. At the time of closure, the mine had hired close to 200 miners.
“As you are all aware it has not yet been possible to pay the May salaries due to cash flow issues. Critical funding was expected from major Chinese financers two weeks ago and its arrival has been pushed out daily until ultimately yesterday, in the absence of confirmation, it was decided to suspend operations and send all but critical employees home,” one of the directors of Lerala Diamond Mines Limited, Laila Green is said to have told the former employees at the end of May 2017.
Originally opened in 2008 by Australian firm DiamonEx, Lerala has battled cycles in the diamond market, being sold to UK junior, Mantle before passing to another Australian firm, Kimberly Diamonds in 2013. The mineral resource of the diamond mine as at December 31, 2015 was estimated at 20.1 million tonnes at 24.2 carats per hundred tonnes pointing to 4.9 million carats.
In late June 2017 the Gaborone High Court heard that as on or before February 2014 Kimberly Diamond acquired Lerala Diamond Mine. At that time the mine was in care and maintenance and its infrastructure, equipment required significant remedial work and was not operating or in production.
In his affidavit Kaisara further reveals that KDL then funded them to the tune of P160 million to start up the mine, but technical problems resulted in a low production of diamonds. The company had targeted an annual output of 360 000 carats from the mine over seven years.
He said during the period that KDL funded the mine, and KDL eventually started to suffer financial difficulties and on or about June 1, 2017 it notified Lerala Mine that it was withdrawing its financial support and that it would no longer be providing financial support.
“Even if the technical problems at the mine were to be resolved the mine without further funding would not until 2018 be able to generate sufficient revenue to cover its operating costs and to discharge its current and outstanding liabilities. And following KDL’s ceasing to fund its day to day operations, nor commence mining operations as was indicated in the brief dated May 30, 2017 which was sent to employees by the Petitioner that the Petitioner is unable to pay salaries due to cash flow problems,” said Kaisara.
The mine then approached court with an advice from Mark Mc Knee from Armstrong’s Attorneys to place the mine under provisional liquidation. Mc Knee in his papers before court noted that the mine has only one real assert namely the mine and its associated infrastructure and equipment.
‘’This is not a liquid assert nor one that is readily realisable by the Petitioner and it is apparent that the petitioner (Lerala Mine )is hopelessly insolvent as it is unable to pay its debts as envisaged in section 368 of the companies Act. And in terms of section 369(f) of companies Act, a company may be wound up where it is just and equitable and I submit before this court Lerala Diamond Mine as the Petitioner has appointed Kopanang Thekiso as the Provisional Liquidator,” said Kaisara.
In his ruling Acting Judge, Justice Tshweneyagae ordered that the Mine be placed under a provisional order of winding up in the hands of the Master of the High court. However, Justice Tshweneyagae also called on all interested parties to appear and show cause why an order should not be granted.
He then authorised the provisional Liquidator to carry on or discontinue the business of the Mine and that all actions and/or proceedings against the mine be stayed and that the provisional Liquidator should hold of.
Creditors Amount owed (US$)
BURS (PAYE & W/Tax) 477 301.89
Botswana Power Corporation 5 199.58
Botswana Red Cross 3 575.23
Collins Chilisa Consultants 2 629.19
Sunday Standard 1 247.42