Lesotho's Kao Diamond Mine to Shut Down Amid Fuel Cost Surge, Weak Prices

Source: Xinhua| 2026-06-01 01:52:00|Editor: huaxia

MASERU, May 31 (Xinhua) -- Storm Mountain Diamonds (SMD) in Lesotho will cease operations at its Kao Mine on June 30 due to rising fuel costs linked to the conflict in the Middle East and a prolonged slump in global diamond prices.

The company announced earlier this week that the Kao Mine would be placed under care and maintenance from July, citing unsustainable fuel costs, depressed diamond prices and mounting capital requirements. The move is expected to affect hundreds of workers.

"The biggest challenge confronting the operation was the prolonged, severe decline in global rough diamond prices," SMD Chief Executive Officer Neo Hoala said, noting that the market downturn is the primary trigger for the closure.

However, rising fuel costs have dealt an additional blow to the company.

Since the United States and Israel struck Iran in late February, triggering the closure of the Strait of Hormuz, global oil supplies have been severely disrupted, with landlocked countries such as Lesotho bearing amplified price shocks at the end of long logistics chains.

The Kao Mine consumes about 600,000 litres of diesel each month to power heavy machinery and haulage operations. Following successive fuel price increases, the mine's monthly diesel bill has nearly tripled.

The fuel crisis has compounded a deeper structural challenge facing the diamond sector -- the rapid proliferation of synthetic diamonds produced at a fraction of the cost of natural stones. Consumer demand has increasingly shifted toward laboratory-grown alternatives, placing sustained downward pressure on prices for natural diamonds.

"This technology has advanced and production volumes have surged globally," Hoala said. "For smaller, independent producers like Storm Mountain Diamonds, this shift is felt acutely."

About 750 permanent employees and contractors will be directly affected by the shutdown. Hoala said the company could not provide a timeline for resuming operations but added that the board would review market conditions every three months.

The closure deepens Lesotho's economic vulnerability at a time when global energy disruptions continue to reverberate across some of southern Africa's most resource-dependent economies