Shares in Kopane Diamond Developments fell sharply at the opening today, 1 Dec, following a surprise announcement that the company had decided to suspend mining operations at its Liqhobong diamond project in the mountains of Lesotho.
Kopane has been mining successfully at Liqhobong from two kimberlite pipes: fresh run of pit ore from the Satellite Pipe, combined with bulk samples from the Main Pipe currently under development. During the last two months, the Satellite plant has been operating at full capacity, and diamond recoveries have been excellent.
However, in the current climate of severe economic and market turbulence, diamond prices, explained Executive Chairman Tim Read, had fallen by 30-50% since October. To continue to produce stones which could not be sold profitably would drain the company's cash reserves and deplete the diamond resource unnecessarily.
All samples taken from the four sections of the Main Pipe have now been treated, and the on-site work for the Definitive Feasibility Study is complete. To continue to recover diamonds would, given the low prices obtainable for the output, be inappropriate, said Read.
The Satellite plant will therefore be placed on a care and maintenance footing with immediate effect, and will be kept in readiness to re-commence operations once market conditions have improved.
The company are also seeking to cut back on overhead expenditure and are keeping a close eye on funding requirements.
Tim Read commented: "I made it clear in my letter to shareholders in our Annual Report, published last week, we would take all steps necessary to preserve the Company and its principal assets. The suspension of mining operations at Liqhobong will conserve cash and prevent the unnecessary and unprofitable depletion of our diamond resources. It is our opinion that rough diamond prices will recover in the longer term once consumer confidence is restored. It is our strategic focus to advance the appraisal and development of the Liqhobong Main Pipe Project to take full advantage of this recovery when it occurs. Both the Company's and general market's view is that the medium and long term outlook for diamond prices is very robust given the projected shortfall in supply."