The South African Diamond Corporation (Safdico) has purchased a substantial number of shares in Lucapa Diamond Company as part of the miner’s bid to raise money for the expansion of its Mothae deposit.
Lucapa shareholders approved the sale of 6% of company stock to diamond manufacturer Safdico for M30 million at its general meeting December 17. In total, Lucapa aimed to raise approximately M110 million.
“We invested in the company because Lucapa needed money to restart the [Lesotho] mine after Covid-19, and for its expansion, and we already have an offtake agreement for their Lulo diamonds,” a Safdico representative told Rapaport News Tuesday.
The companies also signed a two-and-a-half-year partnership deal whereby Lucapa will sell 100% of its Mothae rough to Safdico, which will cut, polish and sell the diamonds. Lucapa will also receive a portion of the final polished sale price.
“We’re going to be buying all their rough, according to their evaluation, and we’re going to polish some of the goods in partnership with them,” the representative noted. “We’ll sell the rough that is not polished either at tenders or face-to-face; we have a free hand to do what we want with them.”
The Mothae mine expansion is expected to take approximately three to four months to complete, and will likely increase output at the site by 60%, according to Lucapa managing director Stephen Wetherall.
“We think it’s a good company, with a future,” the representative added. “We looked very carefully at the company. It’s an aggressive expansion, but very conservative management who we’ve known really well for about 15 years.”
In January, the two inked an agreement that would give Safdico the rights to purchase up to 60% of rough from Lucapa’s Lulo mine in Angola, the maximum allowed under the government’s new reformation program.
Lucapa’s stock rose 7% Thursday following the investment announcement, as well as its notice of intent to purchase the Merlin mine in Australia.