Lesotho is a land-locked country surrounded by South Africa with a total area of 30,355 km2. The total population of the country is 1,930,493 according to 2010 reports. The country has dry winters, hot and wet summers and temperate climatic conditions. The country’s major natural resources include diamonds, sand and clay.
|The national flag of Lesotho.
Image Credit: CIA Factbook
The mountainous country is dependant on the custom duties from the Southern Africa Customs Union (SACU) and export revenue. Recently, the government has reduced the country’s dependency on custom duties by strengthening its tax system. Although the country’s economic growth is based on that of South Africa, its export sector has grown significantly so as to yield trade benefits.
As the country’s exports quantity decreased and SACU revenue declined due to the global economic crisis, its economic growth rate dropped in 2009. However, the country’s GDP gradually picked up and reached $3.853 billion in 2011.
Overview of Resources
The country’s major mineral resource is diamond. Nearly 1,140 carats of diamond were extracted using rudimentary methods in 2001. The country produced 1,500 carats of diamond in 2000.
Other mineral deposits in the country include gravel, sand, fire clay, dimension stone, base metals and crushed rock.
The country also has small amount of uranium, coal and iron. Bituminous shale reserves have also been discovered in the country.
The map of Lesotho. Image Credit: CIA Factbook
In 2011, Firestone diamonds plc of UK planned to undertake the Lighobong Mine in Lesotho to produce 19 million metric tons (Mt) of kimberlite within 17 years. The company announced that it would produce nearly 1 million carats by 2014.
Gem diamonds Ltd. of UK undertook the Letseng Mine, which is the world’s seventh largest kimberlite mine. This large diamond producing mine was reported to have recovered 185 carats of white diamond in 2010.
Lucara Diamond Corp. of Canada conducted a trial mining program in Mothae Mine. In 2010, about 2,102 carats of diamond were recovered from 87,000 dry Mt mined from Mothae mine.
Except diamond mining, other mining sectors in Lesotho do not contribute much to the country’s economic growth. Eventhough the country has several untapped mineral deposits, exploiting them is a challenge due to lack of investment and infrastructure. Recently, owing to operational inefficiencies, the Africa-based Namakwa Diamonds has reduced its diamond production in the Kao mine from 150,000 to 120,000 carat.
In an attempt to overcome these issues, the government announced the 51-49% localisation policy, which makes it mandatory for the foreign investors to sell 51% of their company’s share to the government. This policy will likely boost the country's ailing mining sector. However, the London-based companies, such as Gem Diamonds, which own 70% share of the Letseng Mine, and Namakwa Diamonds, which owns the majority of shares in the Kao Mine are likely to be affected upon the implementation of this policy.
Experts feel that the diamond production in the country is likely to increase with the increasing demand after the global economic recession in 2009. With more aggressive initiatives to attract foreign investment and plans to develop better infrastructure, the country’s mining sector can hope for a bright future.
Disclaimer: The Author of this article does not imply any investment recommendation and some content is speculative in nature. The Author is not affiliated in any way with any companies mentioned and all statistical information is publically available.