Lerala Diamond Mine to Hit Online Auction Block

Following poor performance, financial difficulties and a stint under judicial management, the Lerala diamond mine in Botswana will hit the auction block in late May.

The mine, which was formerly operated by Sydney-based Kimberley Diamonds, ceased operations last spring, and was subsequently placed under judicial management due to the company’s inability to secure the funding needed to continue operations.

Kimberley Diamonds had expected to extract 357,000 carats a year over a seven-year lifespan from the promising Botswana-based mine, but the Australian mining company was only able to produce roughly 59,000 carats in the year leading up to its closure — much less than expected.

Since the mine closed in May 2017, the Botswana government has been in a legal battle over ownership of the US$3.3 million in diamonds that were extracted from the mine in its final days.

According to the Botswana liquidator charged with the case, the 54,000-carat package of diamonds was sold for US$1.2 million to Starhall International.

The Lerala mine, located in Botswana’s central district, was opened in 2008 and shut down twice, in 2009 and 2012, before ceasing operations due to weak sales.

Botswana is currently one of the world’s largest diamond-producing countries and is home to some of the world’s most prolific diamond mines, including Lucara Diamond’s (TSX:LUC) Karowe operation, where the now-famous Lesedi la Rona, the second-largest gem-quality diamond to ever be discovered, was unearthed in 2016.

While the Lerala mine has yet to produce a gem of that magnitude, the mine has probable reserves of 5 million tons at a grade of 31 carats per 100 tons, and inferred resources of 10.3 million tons at a grade of 31 carats per 100 tons.

The online auction for the Lerala mine is set to run May 24 through May 30 and will include:

• Five kimberlite pipes ranging from 0.16 hectares to 2.35 hectares in area
• Mining rights
• A 200-metric-ton-per-hour processing plant
• A 4.2-megawatt diesel generator as well as other assets

Interested bidders will be required to place a US$511,760.25 refundable deposit in order to enter the auction.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.