Lesotho’s Kao diamond mine is facing a critical financial crisis that could lead to its closure within weeks unless the government intervenes with urgent support. Operated by Storm Mountain Diamonds and partially owned by the state, the mine has been severely impacted by a global slump in diamond prices, with some categories falling by as much as 50 percent compared to previous years. The company has warned that it requires approximately R250 million to sustain operations over the next 12 months, a figure that reflects the depth of the financial strain and the scale of assistance needed to avert shutdown.
The mine’s management has formally requested relief measures from the government, including tax and royalty concessions, arguing that the current fiscal framework is discouraging potential investors. A longstanding dispute over allowable tax deductions has further complicated the situation, placing the government in a difficult position as both a shareholder and a regulator. Despite implementing cost-cutting strategies and operational efficiencies, Storm Mountain Diamonds maintains that these efforts alone are insufficient to keep the mine afloat in the face of collapsing market conditions.
The potential closure of the Kao Mine would have devastating consequences for the local economy and workforce. With approximately 750 employees, the mine is a major source of income and stability for families in the Butha-Buthe district. Beyond direct employment, the mine contributes nearly R1 billion annually through wages, procurement, and community development programs. Its shutdown would not only result in widespread job losses but also disrupt regional economic activity and undermine social welfare initiatives tied to mining revenues.
Government officials have yet to publicly commit to the requested financial support, but pressure is mounting as stakeholders warn of the broader implications. Industry analysts caution that failure to act could set a troubling precedent for resource-dependent economies grappling with global market volatility. The situation at Kao Mine highlights the urgent need for adaptive fiscal policies and proactive engagement between governments and private operators to safeguard national assets and protect livelihoods in times of economic uncertainty.