Govt confident of good returns from DiamonEx investment
The Permanent Secretary in the Ministry of Minerals, Energy and Water Resources (MMEWR), Boikobo Paya has told the Public Accounts Committee last Friday that government’s P15 million investment in the DiamonEx Mining Company will be recovered upon completion of the process of reconstruction and recapitalisation exercise.
“We will be able to recover the 2007 P15 million investment. Today, the value of this investment is P10 million from the original investment of P15 million. The 2008 credit crunch dropped the value. Given the listing of the Sayona Mining (DiamonEx new company) in the Australian bourse under different management and ownership, we strongly believe we will cash-in to recover our P15 million,” Paya told the Committee.
The PAC learnt that at the time that the investment was made, DiamonEx had just started actual mining. The Lerala mine had already had its first successful production and DiamonEx came to the local market to raise P50 million sorely for working capital purposes. Although, the company was still a relatively new operation, its prospects were extremely promising, given the quality of the diamonds and the bullishness of the global diamond industry at the time.
Unfortunately in 2008 the world economy plunged into recession which led to a shortage of funding for sightholders who heavily relied on credit to purchase the diamonds. This situation led to a sharp decline in diamonds demand and as such, DiamonEx struggled to meet its debt obligations to creditors, including local investors in the bond.
The PS said the company enjoyed the support of most local investors/pension funds through fund managers who invested in both the bond and the shares. As soon as the company started experiencing problems, it appeared that all affected fund managers came together to protect their investments, together with the Lerala mine. Had the company been liquidated investors would have lost all their investments.
In order to keep the mine under care and maintenance, and to keep it going until industry recovery, DiamonEx needed more funding. “Through the efforts of the fund managers, restructuring was planned through which additional funding provided by the government pension fund, which was already the majority investor. Bondholders eventually took over DiamonEx, converting their bond holding to shares. Being the majority shareholder gave them the required voting power to determine the future strategic direction of DiamonEx,” the PS said.
DiamonEx sold the Lerala mine to strategic management partner who will take care of its operations. In return, investors like the governments’ National Petroleum Fund (NPF) received shares in DiamonEx. Paya said DiamonEx is in the process of reconstruction and recapitalisation exercise, as well as a name change to Sayona Mining Limited. Sayona was listed in the Australian Stock Exchange in June last year.
Meanwhile, Paya has said the NPF’s investment stands at P126 million and believes the Fund will continue to be strong and sustainable. He told the Committee that the Fund is controlled by the adjustments of the pump price. “When the markets collapsed the oil prices dropped and because our pump prices were in line with the commodity there was a big change on the positive as it accumulated. We try to stabilise it so that there is no liquidity in the market,” he said.