Africa-focused Gem Diamonds (LON:GEMD)
said
Thursday it has sold its mothballed Ghaghoo mine in Botswana to Pro Civil,
a local company, for $5.4 million.
Gem acquired the mine from De Beers
in 2007, hoping it would help it diversify its portfolio away from Lesotho,
where its only asset — the prolific Letšeng mine — is located.
Instead, and after spending more
than $85 million developing an underground mine, the company ended up having to
write off $170 million in March 2017 against the asset, which it had placed on
care and maintenance the month before.
Gem acquired the mine from De Beers in 2007, hoping it would help it diversify its portfolio away from Lesotho, where its only asset — the prolific Letšeng mine — is located.
The London-listed diamond producer intended to resume operations once market conditions improved, but it later decided to offload the operation.
“This sale is in line with our
strategic objective to dispose of non-core assets,” chief executive Clifford
Elphick said in a statement.
Proceeds from the Ghaghoo sale, expected
to close in the third quarter, will be used for general corporate purposes,
said Gem Diamonds.
Pro Civil will assume the
environmental liability currently associated with Gem Diamonds. “The Government
of Botswana has been consulted throughout the process and is fully conversant
with the relevant details of the transaction,” it noted.
Ghaghoo is not Gem Diamonds’ only
failed attempt to extend operations beyond Lesotho. In 2008, the company shut
down the Cempaka alluvial mine in Indonesia. Four years later, it had to sell its Ellendale mine in Australia, source
of hard-to-find yellow diamonds, for $15 million.
Since acquiring Letšeng in 2006,
Gem Diamonds has found five of the 20 largest white gem quality diamonds ever
recovered, which makes the mine the world’s highest dollar per carat kimberlite
diamond operation.
At an average elevation of 3,100
metres (10,000 feet) above sea level, Letšeng is also one of the world’s
highest diamond mines.