Good news for the tiny landlocked African nation of Lesotho, and for diamond-lovers everywhere: a major new diamond mine, capable of yielding as much as 10,000 carats per month even in the earliest stages of its development, will go into production there in February 2007. The Kao diamond mine, which is expected to produce stones at a rate of about 740,000 carats per year at its peak, is poised to become Lesotho’s largest single source of foreign currency. As such, its contributions to the economy of this poor kingdom, which won its independence from the British in 1966, are expected to be significant. Whether the results are likely to be a success story on the order of Botswana — where diamond profits have shored up the country’s infrastructure, and increased per-capita income more than a hundred-fold in the past 40 years — remains to be seen.

The shareholders of the Kao mine are expected to earn a tidy sum over the course of the mine’s 23-year lifespan: some $2.5 billion in U.S. dollars. At the moment, the Lesotho government controls 7 percent of the local operating company, although they do have the option to increase their stake to as high as 20 percent after the diamond mine has been in production for 10 years.

The Kao diamond mining enterprise is a pet project of Alan Bond, a 68-year-old Australian entrepreneur who moved to London after being released from prison for corporate fraud in 2000. Bond is spearheading the project as a consultant to the Bermuda-registered Lesotho Diamond Corp, which is heavily backed by the Bond family. The project has been in the works since at least 2003, and is one of three (including a Tanzanian gold project and a Madagascar oil project) intended to rebuild the fortunes of Bond and his eponymous Bond Corp after its collapse in the mid-1990s. Bond hopes to get Lesotho Diamond Corp on the London sharemarket soon, and expects it to make an appearance in the Toronto market in May or June of 2007 — once the operation has produced enough gem-quality diamonds that can be fairly valued.

The target of the Kao operation is described as one of the largest unexploited diamond deposits in Africa: a massive kimberlite pipe located near the village of Kao in the Butha-Buthe District. Considering the fact that Lesotho is completely surrounded by South Africa, one of the world’s foremost diamond-producing countries, the location of this diamond lode comes as no surprise. The Kao operation will crush an estimated 1,400 tons of rock per hour to get at the estimated 326 pounds of raw diamonds the mine is expected to produce per year. Mining operations will continue constantly, for 24 hours a day, until the mine plays out — a matter of 23-25 years — and are expected to cost a little over one billion dollars over the lifetime of the mine. The Kao operation is expected to be a “Big Hole” diamond mine, similar to the famous mine at Kimberly, South Africa, though much larger. Because of the need for spiral roads along the sides of the pit, the Kao Big Hole is expected to reach as large as 800 meters (about one-half mile) across.

While it’s too soon to know what the Kao mine is likely to produce, if other recent Lesotho finds are any measure, there are certain to be some beauties plucked from the nine million tons of kimberlite crushed at Kao annually. In January 2006, four huge flawless diamonds, ranging from 72-112 carats in size, were recovered from the much smaller Letseng mine over the course of just six days. Those diamonds fetched a cool $8 million in the Antwerp, Belgium diamond market.