Lesotho's first diamonds were discovered in 1957. A small mining industry was established in the 1960s. During the 1960s and 1970s, Lesotho's mines yielded several large gems, and the industry employed thousands of people. During the 1980s, mining in Lesotho's Maluti Mountains ceased because of low world diamond prices and royalty disagreements between the government and mining companies.

The Letšeng-la-Terai Kimberlite Pipes - the Main Pipe and the Satellite Pipe - were discovered in 1957 by Peter Nixon while he was working in the area. The pipe was declared a government digging in 1959 and, by 1967, there were up to 6 000 local diggers on the site. The pipes are estimated to have produced 63 000 carats during this time, including the 601-carat Lesotho Brown.

It was already known then that the Letšeng Pipes produced large, high-quality stones.

Rio Tinto Exploration (Pty) Ltd was awarded the exploration license for the pipes in 1968 and was tasked with a feasibility study to develop a full-scale mine. The company drilled 23 boreholes from 1967 to 1972, totalling 2 100 metres of core. Underground sampling of the Main Pipe was carried out via 3,0 x 2,7 metre drives at 60 metres below the surface, based on a 122-metre square grid.

Additional surface sampling using trenches was carried out in 1971 and 1972. Over 80 000 tonnes of kimberlite were treated. Although grades of the Letšeng Pipes were low overall (approximately 3,5 carats per hundred tonnes), many large high-quality stones were recovered. Rio Tinto abandoned the deposit in August 1972.

Lesotho's government then asked De Beers to re-evaluate the kimberlites using the data collected by Rio Tinto. An agreement to mine was commissioned in December 1976. The plan was to develop a mine at Letšeng to exploit the central high-grade kimberlite facies of the Main Pipe by means of an open pit to a depth of 120 metres.

The Satellite Pipe was also to be sampled and evaluated by means of underground drives. The mine was officially opened in November 1977 and was scheduled to have a mine life of 8 years. The mine was closed after 5 years in 1982. The final production total was 272 840 carats, recovered from 9,4-million tonnes of kimberlite, mainly sourced from the Main Pipe.

The central high-grade facies of the Main Pipe had been excavated down to 120 metres, and the Satellite Pipe as a whole had been mined to a depth of only 15 metres. The low grades and the 1980s diamond market recession meant that the mine was not economically viable, despite the regular recovery of large, high-quality stones.

Lesotho's government investigated ways to reopen the Letšeng Mine in the 1990s. Letšeng Diamonds (Pty) Ltd (a Lesotho-registered company) was formed in 1995 as a partnership between industry investors (76 percent) and the Lesotho Government (24 percent). The industry investment component was provided by Letšeng Investment Holdings (South Africa) (Pty) Ltd, which was 50 percent owned by Matodzi Resources Limited, 40 percent owned by Letšeng Diamonds Limited (a company incorporated in Guernsey).

The mining rights for the Letšeng Mine were acquired by Letšeng Diamonds (Pty) Ltd in 1999. The reconstruction of the mine's infrastructure commenced in 2003. Production at the two alluvial deposits - the Qaqa River deposit associated with the Satellite Pipe and the Patiseng River deposit associated with the Main Pipe - started in November 2003. Production at the Satellite Pipe resumed in March 2004.

The 76 percent of Letseng Diamonds (Pty) Ltd owned by Letšeng Investment Holdings (Pty) Ltd was purchased by Gem Diamonds Limited (Gem Diamonds) in July 2006. After the sale, 6 percent of the issued share capital of Letseng Diamonds (Pty) Ltd was transferred to the Lesotho Government. Letšeng Diamonds (Pty) Ltd is now 70 percent owned by Gem Diamonds and 30 percent owned by the Lesotho Government.