A looming global diamond shortage is driving a small band of...

A looming global diamond shortage is driving a small band of adventurous miners to brave bone-chilling winds at the world’s highest mines to extract stones that are worth as much as 20 times the global average.
The excavation is extremely challenging. The diamond-bearing kimberlite formations in the 3350m-high Maluti mountains had for years been largely untouched by mining companies, due to the difficulty and cost involved in extracting the stones from such heights.

The mines, which see temperatures dip well below zero with wind chill, lie through landlocked and impoverished Lesotho’s steep, narrow, winding mountain passes and past one of southern Africa’s two ski resorts. The roads are often blocked by herdsmen on horseback wrapped in traditional blankets surrounded by hundreds of their shaggy sheep.

Recently active mines in the area have been on the rise, with more mines slated to come online soon, as strong demand for high-end diamonds encourages nimbler miners to brave the craggy area known as the Roof of Africa to dig up some of the earth’s most valuable stones.

The Letseng mine, majority-owned by Britain-based Gem Diamonds, has a tiny yield, but produces diamonds whose price — roughly $US2000 ($2600) a carat on average based on 2015 and 2016 prices — far surpassing the global average of just over $US100 a carat. Since Gem took over the mine in 2006, Letseng has produced four of the 20 largest diamonds ever found. That is excluding the 601-carat “Lesotho Brown”, which was discovered at Letseng by a local woman in 1967. One diamond cut from that stone is said to have ended up in Jackie Kennedy’s engagement ring from Aristotle Onassis.
“It’s a mine that mines a jewellery box,” says Clifford Elphick, Gem’s chief executive, quoting a favourite quip from his former boss, gold and diamond magnate Harry Oppenheimer.

Mr Elphick recalls how the late Oppenheimer, who served as chairman of mining behemoth Anglo American and diamond giant De Beers from the late 1950s to early 1980s, would often point to the mountains of Lesotho while flying over them on his way from Johannesburg to Durban, South Africa. “He said it produced the most beautiful of all the diamonds,” Mr Elphick says.

De Beers, which operated Letseng for a decade until a market downturn in the early 1980s, reaped the rare type-IIa stones, known during colonial times as “gin-and-tonic diamonds” because they are the colour of a freshly poured G&T. Gem bought 76 per cent of the mine from the Lesotho government in 2006, and currently owns 70 per cent.

Since Gem’s reboot of the flagship Letseng mine about a decade ago, Lesotho — a tiny nation encircled by South Africa that ranks 160 out of 188 on the UN’s Human Development Index — has made a fresh push to promote its mineral wealth.

It is taking advantage of the impending closure of older diamond mines around the world and the lure of high-end stones, whose prices have held even as revenues from lower-grade stones softened in recent years.

The newest mine to come into production — Firestone Diamonds’ Liqhobong mine, located in the same Maluti mountains as Letseng — was completed end of last year. In February, Firestone held its first auction of diamonds from the mine, selling all 75,936 carats offered. A single 37-carat diamond was sold for more than $US1 million ($1.3m).

Liqhobong “has raised a lot of eyebrows and very well could result in a recurrence of interest in terms of diamond exploration in Lesotho,” said Patrick Morton, a metals and mining analyst at Macquarie Group.
In May, Australia’s Lucapa Diamond said it had raised $US19m to develop the neighbouring Mothae mine. Lucapa expects an average price of well over $US1000 a carat after the mine comes into production in 2018.

There are obstacles, however, to turning Lesotho into an African diamond hub like nearby Botswana, where the discovery of the precious rocks in the 1960s has since led to decades of prosperity and stability.
Lack of skilled workers was a big reason. Government restrictions in Lesotho make it difficult for miners to bring in skilled workers from elsewhere.