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Lephema, a leading figure in Lesotho’s ruling RFP party and head of a business conglomerate, is to buy Lucapa Diamonds’ majority interest in the highly attractive mine.
Opposition politicians have been vociferous about the takeover deal, unanimously describing it as “corrupt” as it reeks of conflict of interest in that Home Affairs Minister Lephema should have similarly followed Prime Minister Samuel Matekane’s decision to divest his business interests from Letseng Mine.
Natural resources minister Mohlomi Moleko has defended the agreement, arguing the larger agenda of protecting jobs for Basotho trumps any conflict of interest concerns. Meanwhile, a top economist has cautioned on the fine print in some clauses of the preliminary agreement.
Basotho National Party (BNP) leader, Machesetsa Mofomobe, yesterday urged ordinary Basotho to support opposition leaders in contesting the purchase of Mothae Diamond Mine by Lephema Executive Transport in court.
He said since lawsuits of that nature are usually quite costly, opposition needs financial support from ordinary Basotho to contest the deal, whose ultimate effect is to close off any chances of other Basotho investing in the mine.
“Did Lucapa report to its country of origin that it sold the mine to a political affiliate, no less a minister? We are going to take matters into our own hands, and the only way is to go to court and open a case; that way we will be able to win this.
“Even if the opposition does not support us as BNP, I can open a case on my own with the support of other Basotho who want to. The PM ought to have reprimanded Minister Lebona as his minister since he did the same thing with Letšeng diamond, but he decided to ignore this,” Mofomobe said.
He added that the Prime Minister’s company, Matekane Mining Investment Company (MMIC), and Letšeng Diamonds violated the terms of their lease and the Mines and Minerals Act, which states that “the holder of the mineral right shall use services available in Lesotho.”
Mofomobe said he is not surprised that Prime Minister Matekane has chosen to remain mum, adding that the imminent transaction for Executive Transport to take over the majority shareholding at Mothae Mine should be challenged and nullified.
“The transaction between Lucapa Diamond Mine and Lephema Executive is immoral, fraudulent, and corrupt. The Government of Lesotho intended to acquire 70 percent, pronouncing themselves through the Minister of Natural Resources, Mohlomi Moleko.
“However, the Cabinet sat again and said they would not purchase the mine anymore. During that sitting, the minister was among the Cabinet.
“The Government is a shareholder of the mine with 30 percent, which means when the Cabinet seats, it seats as a shareholder with its partner as the Minister, who is the representative of the Government. The Cabinet or Government ought to have purchased the mine at the cheaper price that Lucapa gave to Executive Transport, or they would have asked Basotho to form consortiums, and that way they would be able to buy the mine; instead, they gave it to the Minister,” he said.
He said the Prime Minister stopped doing business with Gem Diamonds because a listed company cannot do business with a politically exposed person.
He said the opposition has not sat down to take a resolution on the matter; however, as the BNP, their position emanates from their forefathers, who took out the De Beers of the country to enable Basotho to have a bigger share of their diamonds.
Lucapa Diamond Company Limited has entered into a conditional binding sales and purchase agreement with local Lesotho company, Lephema Executive Transport Pty Ltd, to divest its 70 percent stake in Mothae Diamonds, which owns the Mothae Diamond Mine in Lesotho.
Despite all the political dust the announcement has stirred, hardly any attention has been drawn to some of the clauses in the preliminary agreement, a closer look at which shows there is a need to tread with caution, as a Central Bank of Lesotho (CBL) expert advised in an interview with Public Eye yesterday.
A closer look at the Mothae Mine conditional sale and purchase agreement shows there is a need to tread with caution, which lawyers for Executive Transport will obviously be acutely aware of.
The last four paragraphs, as quoted from the agreement, read:
“This document does not constitute investment advice and has been prepared without taking into account the recipient’s investment objectives, financial circumstances, or particular needs, and the opinions and recommendations in this representation are not intended to represent recommendations of particular investments to particular persons.
“Recipients should seek professional advice when deciding if an investment is appropriate. All securities transactions involve risks, which include, among others, risks associated with mining, exploration, operations, resources, environment, funding, and adverse or unanticipated market, financial, currency, or political developments.
“No responsibility for any errors or omissions from this document arising out of negligence or otherwise is accepted. This document does include forward-looking statements. Forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are outside the control of the company.
Actual values, results, outcomes, or events may be materially different from those expressed or implied in this announcement. Given these uncertainties, recipients are cautioned not to place reliance on forward-looking statements. Any forward-looking statements in this announcement speak only to the date of this announcement. Subject to any continuing obligations under applicable law and ASX Listing Rules, the Company does not undertake any obligation to update or revise any information,” reads the Agreement, in part.
In an interview last night, CBL Principal Economist Retšelisitsoe Mabote said this is investment language, which is mostly about speculating on future values of investment.
“The company is simply saying they have applied the futuristic fundamentals to any prospects that may have been used to tempt Lephema Executive into buying their stake.
“If, for some reason, the output does not come anywhere near what would have been speculated, they should not be held accountable. That is, any risk associated with the other assuming responsibilities should be treated as a result of the speculative judgements,” Mabote said.
Lucapa is an Australian Securities Exchange (ASX)-listed diamond miner and explorer with assets in Africa and Australia.
It has interests in two producing diamond mines in Angola (Lulo, in which Lucapa holds 40 percent) and Lesotho (Mothae, in which Lucapa holds 70 percent).
On Tuesday this week, Lucapa put out an announcement regarding the sale of Mothae to Lephema Executive Transport, noting the agreement follows a strategic review of the company’s portfolio of assets undertaken by the newly restructured board of directors.
The divestment of the stake in the non-core asset enables the company to focus on developing its Angolan and Australian assets.
Lucapa Managing Director and CEO Nick Selby said: “This agreement is the result of a period of offer and negotiation involving Lucapa and several interested parties.
Executive Transport has a successful history with the Mothae Diamond Mine, having provided long-term contract mining services.
Lucapa wanted to, as far as possible, see this mine continue to operate, and Lephema Executive Transport are best placed to achieve this.
“The signing of this agreement is a key step towards Lucapa streaming its portfolio and executing the new strategy, which will focus on assets in Australia and Angola. Under the agreement, Lucapa will receive a nominal purchase price of A$10 000 (M121, 994.92) from Executive as well as approximately $1 million (M12 million) from Mothae in outstanding technical services payments,” Selby also said.
The announcement further states that Executive Transport will assume all liabilities and guarantee obligations relating to Mothae currently held by Lucapa.
Following completion, Lucapa will continue to provide technical services to Mothae under the technical services agreement on normal commercial terms for a minimum of three months.
Lucapa has received confirmation from the ASX that shareholder approval is not required under ASX Listing Rules 11.1 and 11.2, and as a result, the company will not seek shareholder approval for the transaction.
The completion of the divestment is subject to the satisfaction of certain key conditions, as detailed below:
- Receipt of consent from the Lesotho Minister of Natural Resources for the transaction
- Execution of a delegation agreement between Lucapa, the Government, and Executive Transport, whereby Lucapa assigns and delegates its rights and obligations in the mining agreement to the Executive.
- Confirmation from the South African Diamond Corporation (SAFDICO) that the offtake agreement between the Mothae and SAFDICO remains valid following completion of the transaction.
- Amendment of the Technical Services Agreement between Lucapa and Mothae to incorporate a three-month no-fault cancellation provision; and
Subject to satisfaction of the relevant conditions, completion is expected to occur on or before September 30, 2024.
Limited warranties are provided with the shares in Mothae, which are largely sold on an as-is basis.
The agreement otherwise contains customary provisions for an agreement of this nature.