Govt arm-twists diamond mining firms

THE Zimbabwean government has successfully arm-twisted diamond mining companies by forcing them to agree to the consolidation of diamond mines using its position as industry regulator and licensing authority, as well as the major shareholder in the proposed structure.

Taurai Mangudhla

Government, which currently has 50% shareholding in diamond companies operating in Marange through the Zimbabwe Mining Development Corporation, wants all diamond mining companies in the country to be merged into one entity called the Zimbabwe Consolidation Diamond Corporation (ZCDC), arguing this will help plug leakages, enhance transparency in the sector, while also improving efficiency.

Government will have 50% in ZCDC, while other players will proportionally share among themselves the other 50% stake. Although most companies are against the idea, sources this week said pressure and threats by government had instilled fear in the miners, forcing them to the negotiating table.

Close sources to the ongoing consolidation exercise say government, through Mines minister Walter Chidhakwa, has threatened to get rid of players that refuse to comply with its directive.

“They (government) are pushing ahead with consolidation and they say anyone who refuses or resists will be offloaded,” said an insider who requested anonymity.

Government this week summoned all diamond mining companies to submit their financial statements and sign up for the new consolidated firm.

The consolidation exercise, initially scheduled to have been completed by end of May 2015, has been delayed by reluctant players, as well as legal and business processes, including finding a formula of how shareholding in the new company will be derived.

Despite the resistance, one of the wholly government-owned diamond mining entities operating in the Marange area, Marange Resources, has approved the consolidation process in an extraordinary general meeting.

The Marange Resources EGM, according to the diamond miner’s acting CEO Mark Mabhudhu, was the first of many other similar meetings expected to be held by all other diamond producers in the country for the purpose of officially approving and authorising commencement of the consolidation process within 21 days, effective July 28, as government pushes ahead with the loathed exercise.

Explicit reference in a Marange Resources press statement to “all diamond mining companies in the country” puts to bed confusion whether or not the consolidation will be limited to companies operating in the Marange diamond fields or will include all the other diamond miners in the country.

There are five mines operating in Marange — Anjin, Diamond Mining Corporation, Jinan Mining Private Ltd, Marange Resources and Mbada Diamonds — after Gye Nyame and Kusena went under. Gye Nyame and Kusena will be taken over by wholly government-owned Marange Resources. Other diamond producers outside Marange include DTZ OZ GEO and Murowa diamonds.

The Marange Resources EGM also passed special resolutions to call for EGMs for Mbada Diamonds and Jinan Mining whose objectives shall be to vote on a resolution authorising the two entities “to be consolidated into one single entity envisaged by government in terms of the Consolidation Policy” as well as nominate proxies for the two different meetings.

Diamond miners were on record last year querying the consolidation plans on grounds it defies business logic and creates legal and financial problems for the companies.

“There are six or seven companies in Marange with different agreements, so how are you going to put them together as one,” Diamond Mining Corporation director, Ramzi Malik, said on the sidelines of the country’s Diamond Conference last year.

Speaking on the sidelines of the same event, Marange Resources chairman retired army Colonel Tshinga Dube said the proposal is “impractical” and requires very delicate handling of details if it is to be implemented at all. “It’s easier said than done, there are a lot of legal and financial processes, for instance some of the companies may have loans and others have debts,” he said.

Government officials claim some players are opposed the consolidation because of the tight monitoring systems it comes with. They say individually companies have a bigger opportunity to loot diamonds.

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