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Lesotho’s Largest Diamond Mine Faces Imminent Closure Without State Tax Relief

Government Refusal to Waive Taxes and Royalties Threatens 750 Jobs and 10% of National GDP Amid Diamond Price Collapse.

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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.

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DiamondBuzz

De Beers Group Sets Out Portfolio and Organisational Actions to Support Long-Term Value Creation

Company outlines strategic cost optimisation, portfolio streamlining and operational changes to strengthen resilience while positioning for long-term growth in the natural diamond industry.

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De Beers Group is advancing delivery of its business streamlining by setting out a number of planned portfolio and organisational changes to ensure an efficient cost base that strengthens resilience in the near-term while enhancing future competitiveness and retaining optionality as industry conditions improve.

Since 2024, De Beers has been streamlining its business in line with its Origins strategy to reduce costs, divest non-core assets and prioritise investment in activities that create the most value. Significant progress has been made, with more than $100 million of annual overhead costs removed from the business, the sale or closure of a number of non-core assets and significant capital and cost reconfigurations to asset expansion projects.

Simultaneously, De Beers has reinvested in natural diamond category marketing to support the industry’s efforts to grow natural diamond demand, launching new large-scale campaigns and collaborating with key stakeholders across the value chain to foster industry-wide investment. Global consumer demand for natural diamond jewellery returned to growth in 2025, while natural diamond sales increased across US independent jewellers in 2025 and into Q1 2026, led by higher value diamonds and those promoted by De Beers’ Desert Diamonds marketing campaign.

On the supply side, global rough diamond production is now decreasing, with several producers closing mines during 2026. Whilst the increasing rarity of diamonds and the emerging signs of improvement in consumer demand are likely to support longer-term value creation, rough diamond trading conditions are expected to remain challenging in the near-term due to cyclical and industry-specific factors.

Consistent with recent actions to improve business resilience, De Beers intends to pause production at the Venetia mine in South Africa for two years to reduce costs while also rephasing capital expenditure on its underground project. This will involve critical infrastructure investment to enhance the capacity and efficiency of the mine, with the intention to support future production growth as business and industry conditions improve.

De Beers is engaging with stakeholders in accordance with relevant requirements and the company’s values as it moves through this process, and will both support impacted employees and continue to invest in its community and Social and Labour Plan commitments.

This proposed action at Venetia Mine follows the decision earlier this year to pause the Tuzo Phase 3 expansion project at the Gahcho Kué Mine in Canada.

In parallel, De Beers plans to reconfigure its global operating model to refocus and prioritise resources on the core operational businesses and reduce its central corporate cost base.

Al Cook, CEO of De Beers Group, said:

“In line with our commitment to focus and streamline our business, we are making a number of changes to De Beers to ensure greater business resilience in the near-term, while supporting long-term value creation. We recognise the protracted challenging conditions as the diamond industry evolves, though we are encouraged by signs of consumer demand growth in the US and beyond, particularly in higher quality diamonds.

Global rough diamond supply is falling, bringing more support to the market. The changes we are making to our business are focused on underpinning our efficiency now and into the future, favourably positioning De Beers in its leadership role.”

De Beers Group will maintain current production levels through its other operations, and previous production guidance remains unchanged.

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