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Roundup: Zimbabwe shuts 6 diamond firms' operation, forces merger

Xinhua, February 23, 2016 Adjust font size:

The Zimbabwean government on Monday ordered six diamond mining firms, mainly joint ventures, operating in the country's diamond-rich Marange region to cease operations immediately, a move that highlights the substantial risks in mining investments in the country.

Mines Minister Walter Chidhakwa cited the expiration of licenses when he announced to shut down the operations of Marange diamond mining firms in a meeting in the national capital Harare.

"Since they no longer hold any titles, these companies were notified this morning to cease all mining activities with immediate effect," Walter Chidhakwa told reporters and executives from the affected mines.

The firms are now given 90 days to vacate, taking away equipment and their valuables.

This comes after the miners declined government proposals to merge them into one mining entity, in which the state will have a 50 percent stake.

The Marange diamond fields, in eastern Zimbabwe, were first discovered in 2006 and believed to hold 25 percent of world's diamond reserves.

After chasing away small panners, the government allowed commercial evacuation to begin in 2010 and was able to sell the gems on the international markets a year later.

Mining of the Marange diamonds initially brought huge profits for the firms as the diamond fields were alluvial, which required less investments to mine. As the alluvial deposit dwindled, the country's diamond output dropped from the height of 12 million carats in 2012 to 3.3 million in 2015.

The deep decline of diamond revenue contributed part to the 2.5 contraction of the mining sector last year. The economic growth has also slowed to the lowest pace in six years to 1.5 percent.

Zimbabwe is endowed with rich mineral deposits, especially of gold, platinum, chrome, and nickle. Diamond had emerged as the new-found treasure after the Marange fields were discovered.

Following the sluggish growth, the government started to play around the idea of consolidating six Marange diamond firms into one, of which the government holds 50 percent of the stock while operators divide the rest, to stem revenue leakage. But the mining firms cited the differences in each of the six firms' balance sheets, among others, in opposing the proposal.

The government now says it has created a state-owned Zimbabwe Consolidated Diamond Company which holds all the diamond claims in the country.

Shingai Manyeruke, general manager of Anjin Investments, which is one of the affected firms, said in a telephone interview that the order to cease operation from the government had taken them by surprise.

The company previously revealed that it had invested more than 400 million U.S. dollars into its mining operations and is believed to be one of the best performing diamond firms in Zimbabwe.

"Everything just happened so fast. It took us by surprise and consultations are currently in progress with all the stakeholders. Once that is done, we will then come up with a position," he said. Endit