The government of Botswana has lost close to P12 million on an investment it made in one of the resource companies that flogged to Botswana in the last decade, Diamonex Limited. In 2007, whilst still listed on the Botswana Stock Exchange (BSE), DiamonEx issued a P50 million bond in bid to raise working capital. The bond was the first of its kind in the local capital market and government participated in the transaction and facilitated the first ever resource bond in the local bourse. The bond was to pay a semi-annual fixed rate coupon of 13.20 percent with a maturity date set for early September in 2011.
At the same time, figures obtained by Sunday Standard indicate that the bond’s embedded conversion option provided investors with the right, but not the obligation, on maturity to convert 10 percent of the nominal value of the bond to ordinary shares in Diamonex Limited at a conversion price of P1.83.
According to the latest Auditor General’s report, though government’s initial investment was valued at P15 million, the equity shares were valued at only P3 million by the end of March last year. This reflects a loss of over P11 million incurred by the National Petroleum Fund.
“The initial investments in bonds of P15mn in Diamonex had been converted into equity shares upon delisting of the company from BSE and these shares were valued at P3, 464, 352 at 31st March 2014, representing a loss of P11, 535, 648 in this investment,” the report noted.
Diamonex, which operated Lerala Diamond Mine, ran into a financial gridlock following the collapse of diamond prices in the last quarter of 2008. The diamond price collapse coincided with Lerala’s first production from which DiamonEx directors were expecting to begin recouping their investment and settling creditors. The company later delisted from the BSE in 2010 and sold Lerala mine. The Auditor General’s report comes out hardly a year after former Permanent Secretary in the Ministry responsible for Minerals, Boikobo Paya assured the Parliamentary Public Accounts Committee (PAC) that government will be able to recover the P15mn investment it made in 2007.
“Today, the value of this investment is P10 million from the original investment of P15 million. The 2008 credit crunch dropped the value. Given the listing of the Sayona Mining (DiamonEx new company) in the Australian bourse under different management and ownership, we strongly believe we will cash-in to recover our P15 million,” Paya told the PAC in July last year.
Meanwhile whilst examining the financial statements of the National Petroleum Fund, the Auditor General says the figure of impairment of investments in DiamonEx should have been accounted as P11, 535, 648 and not P5, 839, 388 shown in the Income statement based on share valuation of P3, 464, 352.