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Monday, 11 January 2016 14:07

Zimbabwe: Government Excludes Russian Firm From Diamond Merger

By Phillimon Mhlanga and Malvin Mkudu

HARARE, Zimbabwe, January 11, 2016 (Financial Gazette) — DIAMOND mining firm, DTZ-OZGEO, a joint venture outfit between Econendra of Russia and the Development Trust of Zimbabwe (DTZ), will be excluded from government's planned consolidation of all diamond mining companies, the Financial Gazette can report.

This comes as it emerged that government could force some diamond mining firms operating in the country to give up stakes to the State, with the possibility that some of them may not get any compensation for the shareholding.

This would likely affect companies operating from the Chiadzwa minefields, most of whom have been accused of plundering resources and failing to account for cash from diamond sales.

There are several companies mining diamonds in Chiadzwa, and these include Mbada Diamonds, Marange Resources, Anjin Investments (which is jointly owned by the Chinese military and their Zimbabwean counterparts), Diamond Mining Company, Jinan, Rera, Kusena and Gye Nyame.

The consolidation has already started taking shape under the Zimbabwe Consolidated Diamond Corporation (ZCDC), with three diamond companies -- Marange Resources, Gyne Nyame and Kusena - having already been incorporated into the entity.

But sources said the highlight of the proposed merger was the likely exclusion of DTZ-OZGEO from the proposed merger, which was first announced by Mines and Mining Development Minister, Walter Chidhakwa, early last year when he said government would force diamond mining firms to consolidate operations and create one entity in which it would control 50 percent shareholding while the private players would share the remaining 50 percent.

Chidhakwa said government was not prepared to negotiate and would kick out any firm not willing to participate in the initiative.

The decision is understood to have forced Rio Tinto Plc to sell its controlling stake in Murowa Diamonds to Zimbabwe Stock Exchange-listed RioZim, which held a minority stake in the diamond company.

Highly-placed sources said this week that a decision had been taken by government to exclude DTZ-OZGEO from the proposed consolidation.

An official at DTZ-OZGEO who declined to be named confirmed that the company would not be part of ZCDC.

Asked why the company would be exempted when other privately-held firms like Murowa and the liquidated River Ranch were being forced into the merger, he tersely said: "We have a special licence."

While sources within the mining industry suggested that government did not want to upset Russians by consolidating their interest into ZCDC, it also emerged that DTZ, the other partner in the joint venture, was directly linked to the ruling ZANU-PF party.

The board of trustees for DTZ is appointed directly by the party.

In terms of appointments made in 2014, former party national chairman and now ZANU-PF spokesman, Simon Khaya-Moyo, was the DTZ board chairman, with Defence Minister Sydney Sekeramai; Small Scale Enterprises Minister Sithembiso Nyoni; the late vice president Joshua Nkomo's daughter Thandiwe Nkomo Ibrahim; former secretary to Cabinet Charles Utete; lawyer Sobusa Gula Ndebele; business executive Busi Bango; deputy war veterans affairs minister Tshinga Dube; and Mines Minister Chidhakwa being part of the board.

Other DTZ board members included expelled former secretary for administration and State security minister, Didymus Mutasa; former environment minister Francis Nhema; former energy minister Dzikamai Mavhaire; and former labour minister Nicholas Goche.

It was not immediately clear if the involvement of the ruling party had influenced the decision to exclude DTZ-OZGEO or not, but it would certainly appear Chidhakwa would have required approval from his principals to interfere with the company's operations.

Permanent secretary in the Ministry of Mines and Mining Development, Francis Gudyanga, told the Financial Gazette this week that government had not discussed with DTZ-OZGEO, which also mines gold in Penhalonga, about the planned consolidation of its interests into ZCDC.

Asked if DTZ-OZGEO would be part of the consolidated diamond company, Gudyanga said: "Who said that?"

But he noted that government's position was that all diamond mining companies in Zimbabwe would be merged into "one consolidated company".

"So there is no excuse. However, the mechanism on how we do it varies from company to company. Whether DTZ-OZGEO will be part of it or not, is not the issue," he said.

"We are saying the operations of diamond industries including where DTZ-OZGEO is working would be part of government. We haven't discussed with them (DTZ-OZGEO) yet but just like we did with Murowa, the issue we will discuss with them is about the mechanism."

Gudyanga is also the board chairman of ZCDC.

Interestingly, ZCDC has already entered discussions with Murowa Diamonds over the planned merger, although it is not yet clear what terms government may have agreed with the company for its proposed merger.

But during a tour of Murowa two months ago, Chidhakwa said: "Government gave us a directive as a ministry to consolidate all diamond mining companies into one, single entity and we registered the company under the name Zimbabwe Consolidated Diamond Corporation. All diamond concessions and claims will be under this company."

ZCDC is currently recruiting a management team, and a board is already in place but is yet to be publicly announced.

Gudyanga highlighted long-held fears that government may take some diamond mining firms without compensation.

He, however, declined to reveal the identity of the players likely to be affected.

"The bottom line is that the industry will be one but if you ask me about the mechanism, then it's a different story. We can't discuss that because of corporate confidentialities that we have to respect," said Gudyanga.

"We know who will be in and who will not be part of the consolidated company. However, it's not a matter that we can discuss at the moment because it's a process and there are options."

Asked which diamond mining companies would not be part of the consolidated company, Gudyanga said: "I can't tell you who they are but we are prepared to go to 100 percent on our own (in terms of shareholding in ZCDC)."

Some companies did not bring in required capital for exploration on Chiadzwa claims they were given by government and concentrated on alluvial mining.

Now, most of the diamond mining firms in Chiadzwa have run out of alluvial deposits although they have been resisting the proposed consolidation.

Gudyanga also hinted that merging of diamond companies could take longer than anticipated.

"I cannot give a timeframe because it's a process and we are still discussing with some of the diamond miners," he said.

(Finacial Gazette: This e-mail address is being protected from spambots. You need JavaScript enabled to view it )



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