STORM MOUNTAIN DIAMONDS: Precious Pinks from Kingdom in the Sky

High in the Maloti Mountain Range – home to some of the highest peaks in southern Africa and some of the most remote communities on the continent – economic activity thrives in amongst the lush and peaceful crests.

This is diamond country, a commercial lifeblood for Lesotho and an industry heralded as a driver of wealth and opportunity.

While most sleep in Maseru and other surrounding towns, busy mining teams, set for the Kao mine, are up early and ready to travel to work. Operated by Storm Mountain Diamonds (SMD) – a JV between the government of Lesotho (25%) and Namakwa Diamonds (75%) – the Kao mine is a jewel in the crown atop Lesotho’s mining industry, in an area of critical paleoenvironmental importance.

Covering the largest kimberlite pipe in Lesotho and with an indicated and inferred resource base of 12.7 million carats, Kao mine holds vast undiscovered potential, and Storm Mountain Diamonds CEO Mohale Ralikariki is confident about the future at this site, 2500m above sea level.

A mining industry veteran, Chairperson of the Lesotho Chamber of Mines, and leading Storm Mountain for the past seven years, Ralikariki says that future is exciting.

“The future looks great with long life of mine,” he smiles, “only the technical and economic resource considerations as well as external factors such as prices, currency volatility and regulatory changes will determine the best possible options going forward.”

Through Kao, SMD employs more than 700 people and contributes M700 million to the state through taxes and levies. The mine is a source of some of extremely rare diamonds including pink, purple, blue, yellow, top light brown as well as classic whites. These fancy-coloured diamonds are some of the world’s most appealing and exceptional investments, and Kao is famous for fuelling Lesotho’s output.

FANCY PINKS

In October 2022, the company announced that it had discovered a 47.80 carat pink diamond, named the Pink Eternity. The largest pink diamond discovered at Kao, the Eternity was blessed with the light, pale pink hue for which the mine has made its name.

“The resource has proven itself to contain high quality Type IIa pink diamonds across wide areas of the pit. We are very fortunate,” highlights Ralikariki.

“The Pink Eternity was sold as a rough diamond to an international diamond manufacturer. We are uncertain as to the exact status of the manufacturing process but it is our understanding that the planning in terms of the manufacturing for such an important stone would take significant time.”

Following on the from the discovery of the Pink Storm (36.06ct), Purple Princess (3.11cts), Rose of Kao (29.59cts), and Pink Palesa (21.86cts), the Eternity is expected to perform strongly should it be auctioned. In September 2022, the Williamson Pink Star (11.15cts) from the Williamson mine in Tanzania sold for $57.7 million through Sotheby’s Hong Kong.

Ralikariki outlines the process when a significant find is unearthed.

“The process is similar to any important stone recovered and this is done within very strict security protocols. Once the stone is exported successfully to Belgium, it is cleaned (boiled) and valuated before a decision on selling it can be taken.”

At Kao, the numbers are encouraging. Overall diamond population in the main pipe is above the global average in both quality (65% gem, 8% near gem and 27% rejection) and average stone size (0.29 cts/stn). Type IIa diamonds – single special stones – bring high value for SMD, and contribute some 40+% of the revenue generated on the tender sales held five or six times a year in Antwerp. At Kao, 47 diamonds with values greater than US$ +1 million were recovered between 2012 and 2022.

“Kao produces around 200,000 carats per annum from treating around five million tons of ore. That equates to around $70 million in revenue per annum,” says Ralikariki.

“From what we know Kao and Letšeng are the two mines that have managed to consistently remain profitable over a number of years. Kao produces a mix between high quality diamonds and smaller run of mine diamonds, whereas Letšeng is more of a large stone, high quality producer,” he comments on the local industry.

HEART OF THE ECONOMY

In terms of the wider southern African space, “it is difficult to compare Kao against the other mines,” he says. “With diamond mining there are so many variables to consider. For example, on the revenue side, the mixture of grade and quality differs substantially from mine to mine. On the cost side, Kao is an open pit operation with a relatively low stripping ratio whereas many of the South African mines are now already going underground adding significant capital and operational cost.”

After the discovery of the kimberlite pipe at Kao in 1956, the mining license was eventually acquired by Kao Diamond Mines (KDM) in 2006. For three years, production was low and the business was managed poorly, resulting in the liquidation of KDM in 2009. In 2010, SMD took up the license from the government of Lesotho and went about a restructuring programme, investing in mining operations and reinvigorating the site. Job opportunities were created, and value was promoted, bringing international investment into Lesotho.

“Lesotho mining industry is fairly nascent compared to other jurisdictions and it has a bright future looking at its recent performance,” details Ralikariki. “There are over 400 kimberlite bodies in Lesotho and the country has the highest concentration of kimberlite bodies per square kilometre compared to any other diamond mining jurisdiction in the world, meaning the true mineral wealth potential of this country is yet to be determined, new mines opened recently and they are under development, there are also quite number of exploration licences granted recently.

“Africa is known for its resource wealth and similarly the SADC region is blessed with abundant resources that driving national economies. Mining industry has over the years been key for the growth of the SADC regional economy and it has played an instrumental role in driving the region’s industrialisation. It remains in the heart of the regional economy in the future.”

He expects Kao to produce 200,000 carats in 2023 while overcoming challenges that impact the wider economy at the same time. Times are tough for mining, and for southern Africa, and that is why certainty and success in big business must be hailed appropriately.

The region’s economy is only expected to grow at 2.3% in 2023, down from 4.1% in 2022. Lesotho is only expected to achieve 2.8% growth as a maximum with fallout from multiple major factors in South Africa impacting the landlocked mountain nation.

INCREASING PROCESSING

For SMD to grow, and for Kao to cement its position within the top tier of Lesotho’s mining industry, Ralikariki and team are focused on the underlying goal of every mining operation – increased output and efficiency. Through this strategy, the business will overcome wider macroeconomic hurdles.

“Fuel prices effectively doubled up from the levels of one year ago and all other costs rose by double digit percentages. Fortunately, we did not have any interruptions as a result of unavailability of spares or equipment although we did experience some shortages from time to time.

“We have certainly felt the pain of the high inflation in the past 12 months mainly as a result of the war in Ukraine,” he says. “Diamond prices and specifically the quality diamonds that we are producing have however stayed reasonable and we remain positive about the outlook for the future.”  

With around 18 years of life left in the mine currently, efficiency is key to long-term sustainability.

“Increased processing capacity is possible for Kao due to the fact that the mining in the Kao pit is reasonably unconstrained and there are no bottlenecks in the operation. Increasing the process capacity is therefore a strategic option,” Ralikariki suggests.

Thankfully, the team has experience of maximising output in challenging times. During the pandemic lockdowns of 2020, the mine was forced to close and ramp up health and safety protocols dramatically. Even during this time, production remained at a good level while ensuring the safety of staff – highlighted as the company’s greatest asset.

“We have not seen a drop in demand, rather a change in buying patterns as a result of the uncertainties,” says the CEO.

Longer-term, the company is keeping an eye on projects in Lesotho and engaging with its partner – the government – to guide and propel diamond mining as a thriving industry sector. Asked if SMD will acquire and grow beyond Kao in the immediate future, Ralikariki is reluctant to commit. “It has not been decided yet, but there are quite number of interesting green fields project in Lesotho,” he says.

“The focus is on optimising the operations, installing latest technology to improve diamond liberation and efficiency. We are also focusing on procurement localisation as part of boosting the struggling national economy. We are integrating local businesses into the operations and giving them a wide range of opportunities for supply of goods and services. There are major projects in the pipeline aimed at increasing the throughput with better efficiency using the latest diamond processing technology,” he concludes.

For those working in the mine, from management team through to Basotho villagers operating through the supply chain, Kao remains crucially important. The wealth that flows from high in the Maloti Mountain Range, down through the majestic valleys, and around the land of the Sotho helps the country to live up to its moniker of the ‘Kingdom in the Sky’.

“We shall strive through the storms in the mountains to mine safely, cost-effectively and sustainably,” is the company’s mission, and so far this is being achieved.