Chiadzwa diamond mining firms to merge

Published: 21 February 2014

MINES Minister Walter Chidhakwa has suggested that only one company could survive the purge expected on diamond mining operations in Chiadzwa, with the rest likely to be forced to merge.

Indications are that Mbada Diamonds, a hugely philanthropic diamond mining firm in Chiadzwa, could be unaffected by a restructuring of mining operations spearheaded by Chidhakwa who fears government is losing millions of dollars because of lack of transparency in mining operations.

But he declined to reveal if Mbada would survive, saying: "I do not know where that is coming from, but we are looking at a company with a proven record on social responsibility, strongest capabilities be it mining receipts, equipment, marketing, human resources.

"We also want a partner we can work with, one that will make contributions to national development."

He suggested that people were speculating around Mbada because "it sponsors soccer, a popular sport."

He revealed that forensic auditors investigating another diamond firm, Marange Resources, had completed the audit which they were due to present to the Ministry of Mines yesterday.

Chidhakwa, who spoke exclusively to the Financial Gazette, said he could not give details of the audit findings until the report is handed over to President Robert Mugabe.

He said plans to overhaul the Chiadzwa diamond mining operations, which were triggered by alleged pillage and graft, would affect six mining firms, including Anjin, which is jointly owned by the Chinese Defence and the Zimbabwe Defence Industries.

The six diamond mining companies would not have their licences renewed as government takes practical steps to improve accountability and transparency in the sector, he said.

The first merger is expected to be announced during the first quarter of the year.

Currently they are seven companies in Chiadzwa namely Mbada Diamonds, Marange Resources, Anjin Investments, Diamond Mining Company, Anjin, Kusena and Gye Nyame.

The companies operate as joint ventures with government through the Zimbabwe Mining Development Corporation (ZMDC). Marange Resources is, however, wholly-owned by the ZMDC.

"The first thing that we are doing is not to issue out new mining licenses in Marange. (The) second is to ensure that those such as Gyne Nyame would be merged. Very soon we would be announcing the merger of companies in Marange," Chidhakwa said.

He said once the seven companies' licenses expire, they would not be renewed until the exercise was complete.

"The licenses were issued differently and would expire at different times," Chidhakwa said.

Asked if they would compensate the companies, Chidhakwa said: "Where there is need to compensate, certainly we would look into that. The exercise would be done in an organised manner," he said.

He said the audit at Marange Resources was done and scheduled to be presented to the ministry yesterday. He, however, could not reveal much about the contents of the audit saying it was necessitated by misappropriation of funds at the mining company.

"That audit will be presented to the Ministry's permanent secretary tomorrow (Wednesday). Even then if it's presented (us), naturally I do not want the President to read it in the press. I would want to present it to him first and brief him on the developments before it is made public," Chidhakwa said.

The audit will cover the miners' operations from the time they first set up.

Insiders say the audit revealed that government was prejudiced of millions of dollars as management raised inflated procurement receipts and pocketed the difference.

The firm bought heavy duty mining equipment which cost millions of dollars, but management allegedly generated receipts inflating the figures to alarming levels. The audit, which was for the period January 2010 to December 2013, also investigated methods used to determine the firm's remuneration policy.

Auditors investigated the amount of diamonds taken out of the country and how much they have been sold for.

"We will investigate all companies in the area," he said.

"ZMDC should be our biggest company as it is the custodian of most minerals in Zimbabwe, but its balance sheet is not anything to talk about. Why? Is it the way we have structured it?
- fingaz