ZIMBABWE Consolidated Diamond Company (ZCDC) is courting investors for US$300 million to boost its operations, dogged by the depletion of alluvial diamonds and lack of equipment to pursue diamondiferous kimberlites, the Financial Gazette has learnt.
The company wants to use the money to purchase mining equipment and expand its operations in the diamond fields of Marange.
The State-controlled resources firm, formed after government took over all diamond mining companies in Marange, has failed to make an impact despite government’s intention to turn it into a diamond mining behemoth.
ZCDC took over the mining claims previously owned by Mbada Diamonds, Marange Resources, Anjin Investments, Diamond Mining Company (DMC), Jinan, Rera, Kusena and Gye Nyame two years ago. President Robert Mugabe claimed last year that the country had lost at least US$15 billion through underhand deals by the diamond mining companies since they started operating in Chiadzwa about a decade ago.
Mbada and Anjin challenged the acquisition of their assets in court. While Anjin lost its bid to reclaim the assets, the dispute involving Mbada, whose other shareholder and chairman is Robert Mhlanga, has not yet been resolved.
Apart from Marange Resources and DMC, which are currently the only active diamond mines under ZCDC, operating licences for other diamond miners were not renewed by government.
Government had a 50 percent stake, through the Zimbabwe Mining Development Corporation, in all the diamond firms except Marange Resources which it wholly-owned. It was, however, not actively involved in the companies’ day-to-day operations.
Well-placed sources at ZCDC said the diamond mining company was on the market for a US$300 million bailout, although they did not give finer details on the plans for the cash, except to say it would be used for the purchase of mining equipment and expansion projects.
In response to questions, ZCDC acting chief executive officer, Ridge Nyashanu, said capitalisation of the company would not be “a once off event, it is a process”.
“You go stage by stage,” he said.
Asked about the quantum of cash ZCDC was looking for, he said: “The US$300 million you are talking about is a long-term projection of what we are looking for. We are at a stage where we are upgrading our plants to enable us to process conglomerate diamonds.”
Nyashanu said they have approached a number of investors “who are willing to support us”.
He did not reveal the identities of the investors.
The country is currently grappling with a liquidity crunch, a situation that has limited the capacity of locals to fund such a huge bailout. It would, therefore, appear that ZCDC could be scouting for cash from offshore investors, but may need to present an impeccable plan that includes how the dispute over claims ownership would be resolved.
Francis Gudyanga, the permanent secretary in the Ministry of Mines and Mining Development, declined comment on ZCDC’s cash-raising initiative, referring questions to Nyashanu.
Diamond mining companies in Marange exhausted alluvial deposits even before government’s takeover of their claims.
ZCDC has, therefore, found it difficult to make money out of the acquired assets, and would require a huge capital outlay to invest in machinery to embark on underground diamond mining.
But even before it embarks on such a project, the company would need to do feasibility studies on any diamondiferous deposits, that is if any kimberlites or conglomerates have been discovered in the mining area.
Gudyanga admitted that the Marange diamond fields have not been scientifically investigated, resulting in the country remaining ignorant of the value of what lies in the ground.
He told the Financial Gazette: “At the moment we are working in the two concessions — the ex-Marange Resources and DMC claims. But we haven’t accessed other areas yet. So I feel there are still diamonds. I, however, must admit that the companies that used to extract diamonds in the area never did serious exploration.”
Mineral exploration, which helps with geological data, is the most important part of the mining cycle. It is a process through which commercial concentrations of mineral resources are discovered.
The process covers activities from preliminary collection of existing geological data to drilling and sample assays.
Exploration assists in guiding valuation and extraction rates necessary for sustainable mining. It provides for opportunities for investors willing to take calculated risks and invest in the country.
Although, the Reserve Bank of Zimbabwe availed a US$30 million facility last year for the purchase of equipment from Belarus, diamond output from the Marange fields has fallen sharply since the creation of ZCDC, with 2016 production plunging to a paltry 900 000 carats from peak figures of 12 million carats annually.
Expectations were that ZCDC would be able to extract and sell about 500 000 carats every month at an average value of US$25 million.
The projections, according to the Minister of Mines and Mining Development, Walter Chidhakwa, were that the country would earn between US$25 billion and US$30 billion in the next decade, compared to the US$2 billion realised since 2006 when private firms were given the green light to mine diamonds.
Critics argue that firms in the alluvial diamonds-rich area were allowed to operate with impunity, with politicians deliberately ignoring the looting of diamonds because they personally benefitted from the vice.