Diamond Mine in Lesotho Closed for Foreseeable Future

London—One of the diamond mines in Lesotho known for producing large, valuable stones will remain shuttered until next spring, at least.

Firestone Diamonds Plc said Monday the Liqhobong Diamond Mine, which it operates in a 75-25 joint venture with the government of the Kingdom of Lesotho, has been on care and maintenance since April 9 due to COVID-19.

The mine will remain closed, with the majority of employees laid off, for at least 12 months as the company scrambles to save money in light of the uncertainty surrounding both diamond sales and prices.

“The company has gone through a painful process to implement the care and maintenance phase, which we believe is in the best interest of its shareholders and lenders,” CEO Paul Bosma said in the company’s quarterly report.

“We are determined to make our cash last as long as possible so operations can resume once the market recovers for the categories of diamonds predominantly recovered from Liqhobong.”

With the mine temporarily closed, the miner will focus on securing a capital deferral from its lender, ABSA bank, and working with its main shareholders and bondholders.

Firestone ended its fiscal year with a cash balance of $9.6 million, down from $17.3 million in Q3.

Closing the mine cost it $3.2 million, including termination costs of $1.9 million.

For those employees who remain, the company, which was looking for ways to cut costs even before COVID-19 hit, is reducing staff salaries by 25 percent, executive salaries by 40 percent and non-executive director salaries by half.

Firestone did not sell any diamonds in its fourth quarter.

The miner said it has 64,700 carats on hand, which it will sell in separate parcels to test the market and determine if it can achieve prices that make reopening the mine worthwhile.

It expects to sell the first parcel in calendar Q4 2020, though Firestone noted the global market outlook remains “uncertain,” as many countries still have to reach their COVID-19 infection peak and face the possibility of a second wave of infections.

The United States leads the world in both the number of coronavirus cases (3.4 million) and deaths (nearly 140,000, according to the latest data from the World Health Organization). Second is Brazil with 2.1 million cases and about 78,000 deaths.

In the U.S., cases are spiking in a number of states including Georgia, Florida, California, Texas and Arizona.

Firestone also noted: “De Beers and Alrosa continue to defer sales , which contribute to a buildup of inventory, which will delay the timing of a meaningful recovery in prices. Smaller producers that manage to sell on tender will likely continue to experience substantial discounts until such time as demand returns and excess inventory has reduced.”