Thursday, September 28, 2023

Pension funds mull over Lerala rescue plan

Local pension fund companies are eyeing to find wealth for their members in the ailing DiamonEx’s Lerala operation by providing a rescue plan that is expected to carry the mine through the tough times of global economic crisis.

According to the rescue plan that is being mulled over by the pension funds and the DiamonEX parent company, the former will fork-out P 35 million that will translate into 80 percent shares in the company.

“The deal has not been finalised yet but there is an interest from the pension funds through their investment managers to extend the life support to Lerala mine. That will see the pension funds owning 80 percent of the shares while 20 percent will remain with the parent company,” a source close to the negotiations said.

Information reaching the Sunday Standard indicates that most of the pension funds managers who have expressed interest are the big ones and they are also bond holders in DiamonEx Botswana.

At the end of February, DiamonEx Limited (DiamonEx) said its wholly owned subsidiary Diamonex Botswana Limited (DBL) had been placed under Judicial Management pursuant to orders granted by the High Court of Botswana. “This order provided DBL with a period of immunity from claims from its creditors. Since the granting of the orders, DiamonEx has investigated numerous alternatives to position DiamonEx for the future,” the company said.

The move came at a time when angry creditors were clamouring for their money which they said was long over due.

One of the contractors told Sunday Standard that the company just closed-down without any notice to him. He pointed out that he owed over P 13.5 million and was stuck with over 100 employees at the site but attempts to get clarification on the future of his company from Fleming Asset Management Botswana were futile.

“I am so much worried about the over hundred employees here and I need some explanation on this issue,” he said.

It further stated that it has finalised the key terms of a conditional agreement for the sale of 80% of the shares in DBL (Acquisition Agreement). The agreement is with Fleming Asset Management Botswana (FAMB) acting on behalf of the DiamonEx Convertible Bond Holders (Bondholders).

“The agreement provides for the transfer by DiamonEx of 80% of the shares in DBL. Additionally DiamonEx will transfer its diamond exploration tenure in the USA to the Purchasers,” the company added.

Lerala mine lies about 120 kilometers from Palapye ÔÇô a place earmarked for the development of the country’s second university ÔÇô and it is expected to create close to 300 new jobs directly.
At full production, the mine is to produce 330,000 carats per annum over its life span of 10 years. Its production is expected to be sold through the DTC Botswana which will become operational by 2008.

The mine is expected to maintain low production cost and the most interesting thing about the project is K2, which is the richest resource.
The mine is thought to have a net operating cash flow of US $100 million on revenue of US $ 230 million over a period of 10 years.

The mine will be an open cut operation and there is a provision for underground mining after 10 years.
Further, the mine will be boasted by the envisaged diamond shortage in the market and the price spikes that are being driven by China and Indian markets.

In the next 10 years, diamond prices are expected to rise by 50 percent if we discount the global economic crisis.


Read this week's paper