Zimbabwe declines US$200 million German investment in diamond mining

The Zimbabwean Government, says it has turned down a US$200 million loan offer from a German company with an interest in mining the precious resource at the controversial Marange diamond fields.

HARARE - 

Government spokesperson and the Zimbabwe's Information and Publicity Minister, Dr Sikanyiso Ndlovu, said the government would not allow foreign firms to mine the Marange diamond field. His comments come at a time when the country is under probe from a Kimberley Process team, which has been in the country for the past week.

However, his comments are in stark contrast to data in a Zimbabwean Parliamentary Committee on Mines, Tourism and Environment report which stated  that the Zimbabwe Mining and Development Company does not have the capacity to mine diamonds at Marange.  The report went on to say the ZMDC, a government parastatal, cannot viably extract diamonds at Marange without the backing of a foreign investor.

"Your committee noted with concern that ZMDC does not have the capacity or financial resources to carry out feasibility studies, to mine or to put a security fence around the area, the report says.

But Ndlovu, reiterating Mines Minister Midzi's last week sentiments, said Zimbabwe was realizing over US$400,000 a month from the sale of diamonds mined at Marange by the state owned ZMDC.

He also revealed that the government had turned down the investment offer from an unnamed German mining and investment company. "The government turned down a US$200 million loan from a German company that was interested in mining in Marange," said Ndlovu.

He added that the government was happy with the way/mode of mining by the ZMDC, whose legality to mine the diamonds has been queried: "we are happy with the job that ZMDC is doing in the area."

Ndlovu spoke as a World Diamond Council (WDC) team met with government officials and other key diamond and mining players in Harare as part of investigations into allegations Zimbabwe was in breach of council rules by allowing the smuggling of diamonds mined from Marange and other places in the country to South Africa for sale to illegal dealers.

Zimbabwe together with Venezuela has been accused by the World Diamond Council of illegal trade of diamonds, outside guidelines stipulated by the Kimberely Process.

However mining industry experts told Mineweb the move by government to oust other international players and investors in the mining of diamonds was detrimental to the country's potential to realise the much-needed foreign currency.

"The trend all over the African continent is for such developing countries as Zimbabwe to work closely with international investors who have the capacity and proven track record to viably mine minerals on the continent," said a source privy to mining developments in the country.

But Midzi told reporters recently that ZMDC had secured fencing from South Africa to widen a security cordon to 12km. And while the committee says ZMDC has not made any credible surveys of the area, Midzi said the corporation has already successfully run a trial mining run, lifting daily ore processed to 25 tonnes per day from just 2 tonnes in April.

 "We are satisfied that the diamond yield is enough to enable the ZMDC to move to the next stage. The ZMDC has not drawn from any external source so far, and we are confident the project can sustain itself from the diamonds it is mining there," said Midzi.

But the MPs, who make up the parliamentary portfolio committee say their investigations have found that ZMDC had no long term plan ready for the area, and that it has no financial capacity to survey diamond fields in the Odzi, Chirasika and Wengezi areas.

"A number of gold companies and the diamond project in Chiadzwa need investors in order for the country to derive maximum benefits from minerals," the committee reports. "Local and foreign investors are willing to invest in the mining sector, but are uncertain about the policy framework of the government."

The increase in the ZMDC's activities at Marange is despite a legal challenge by Africa Consolidated Resources (ACR), the company that claims to have been unfairly stripped of the Marange claim.

Andrew Cranswick, chief executive officer of ACR said Marange would require an investment of US$20 million for an eight-month initial development phase. Midzi insists, though, that ZMDC's funding will come from the stones it will export once full production begins. The ZMDC is yet to export any of the diamonds it has extracted since last month, Midzi says.

Close sources to the country's mining ministry say Zimbabwe could have lost about US$300 million worth of the precious stones after villagers, illegal panners, dealers and smugglers invaded the Marange fields.

The area is now cordoned off and a heavy presence of the national army patrols the area. But the army is alleged to be involved in the smuggling of the diamonds.

And Ndlovu's optimism about the ZMDC's capacity to exploit the Marange diamond deposits is in stark contradiction to calls by Reserve Bank of  Zimbabwe governor Gideon Gono who has publicly called for a foreign partner to be brought in saying the state firm did not have adequate technical capacity and financial resources to mine diamonds.

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