The Kao Diamond Mine, Lesotho’s largest diamond operation and a crucial contributor to the national economy, is facing imminent closure within weeks, according to operator Storm Mountain Diamonds (SMD). The company, which is 75% owned by Namakwa Diamonds Limited and 25% by the Government of Lesotho (GOL), has issued a dire warning, appealing for urgent financial relief to avoid shutdown.

The crisis is driven by a steep global decline in diamond prices and demand, coupled with a deepening dispute over tax and royalty obligations.

• Financial Strain: SMD’s revenue has plummeted, with 2024 sales hitting only $50 million from approximately 250,000 carats sold—less than half of its $105 million revenue in 2022.
• Urgent Need: The company requires approximately $13 million in new investment to maintain operations over the next year.
• Regulatory Deadlock: SMD claims the Lesotho Revenue Services (LRS) has breached binding original mining agreements by imposing higher tax rates, restricting deductions, and withholding VAT refunds. This lack of a stable regulatory environment is deterring potential investors.
• Sought Relief: SMD has formally requested the GOL to suspend tax assessments and waive royalty payments to secure the necessary investment and extend the mine’s lifespan.

Economic Fallout:

The potential closure poses a significant threat to Lesotho’s economy. The diamond mining sector accounts for around 10% of the country’s GDP and up to a quarter of its total exports by value. The shutdown would result in the loss of approximately 750 jobs and could severely undermine investor confidence in one of Southern Africa’s key mining industries.

The GOL faces a difficult decision: offering assistance to a company in which it is a direct shareholder while managing public perception and the demands of its tax authority. Industry analysts warn that a failure to reach an agreement swiftly could trigger a major economic and employment blow.