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Storm Mountain Diamonds will put the Kao mine in Lesotho on care and maintenance from July as it faces financial challenges thanks to a prolonged downturn in the rough market.
The company was already struggling in October, and at the time, requested urgent tax breaks from the government to procure investment to keep the business running and prevent closure. However, rising fuel costs resulting from the Middle East war have stressed the miner’s finances even further, it said last week.
“The biggest challenge confronting the operation was the prolonged, severe decline in global rough-diamond prices,” Storm Mountain CEO Neo Hoala said in a press release seen by media outlets. However, its diesel bill has nearly tripled since the conflict, due to successive increases, it said. The mine uses about 600,000 liters of diesel per month to power its machinery and haul trucks.
Synthetics are also causing downward pressure on rough demand, the company explained.
“This technology has advanced and production volumes have surged globally,” Hoala said. “For smaller, independent producers like Storm Mountain Diamonds, this shift is felt acutely.”
Hoala did not provide a timeline for resuming operations but noted the board would review the market conditions every three months. The company employes about 750 permanent and contract employees.
Other diamond miners are also feeling the financial strain of the slow market. Petra Diamonds is closing its Finsch mine to preserve cash and laying off a number of workers. Meanwhile, Burgundy Diamond Mines is looking for a buyer for its Ekati site, and Mountain Province delisted from the Toronto Stock Exchange (TSX) as it considered selling.
Image: The Kao mine. (Storm Mountain Diamonds)
