Zimbabwe diamonds: Incompetence rules

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Taurai Mangudhla
An internal report by the Minerals Marketing Corporation of Zimbabwe for the January diamond tender has exposed startling variances of up to 319 percent between the reserve price and the market bids against the accepted industry global variance of 15 percent, according to an expert.

This puts into sharp focus the competence of Zimbabwe Consolidated Diamond Company’s valuators, amid allegations the company’s officials and some politicians have used various machinations to salt away diamonds and revenues.

MMCZ is a government agency charged with the marketing of all minerals except for gold and silver.

As reported in the previous issue of this publication that the country could still be losing millions of dollars of potential revenues through leaks orchestrated by a syndicate linked to some ZCDC managers and politicians, fresh details have emerged, showing massive variances between the reserve price and market bids during the last auction.

The internal MMCZ report, which according to insiders and some buyers was meant for internal distribution, found its way to as far as the United Arab Emirates and India where some of the buyers came from.

The report exposed stark differences as astronomic as 6 389 percent between the reserve prices, set by ZCDC and the market bids. This, according to experts, should compel Government to demand ZCDC’s diamond footprint for comparison with previous operations prior to the consolidation of the diamond mines in Chiadzwa.

For the January/February 2018 tender ZCDC expected to fetch $54, 4 million at an average reserve price of $85, 61 per carat. Instead, the highest bids on all eleven parcels could only fetch the company $17 million at an average price of $26, 80 per carat.

This represents a whooping 319 percent difference between expected price and what was achieved on the auction floor.

Computations done by an independent diamond valuator for Business Weekly shows that the largest out of eleven parcels was made up of 170, 564 carats whose reserve price averaged $48, 73 per carat. However, the highest bids only averaged $16, 29 per carat, making a variance of 299 percent. Meanwhile, ZCDC expected $8,3 million from the parcel yet the highest bids for the diamond parcel was $2, 8 million.

The second largest parcel of 117,906 carats was expected to fetch an average $71, 76 per carat but only got a maximum bid of $23, 79 per carat, making a 302 percent variance.

The third largest parcel of 106, 966 carats got a maximum bid of $21, 87 per carat instead of $86, 13 per carat.

The single largest stone at the tender was 13, 84 carats. The stone was expected to fetch $214,000 based on ZCDC’s reserve price of $15,500 per carat. However, the highest bid was $2, 700 per carat, amounting to $37, 368 while the third highest bid for the stone was $30, 515 at $2204 per carat.

A total of 635 707 carats were put to tender recently during that same period.

According to a top independent diamond valuator with experience in Zimbabwe’s diamonds, the difference in expected versus achieved prices is either a sign of gross incompetence  in respect of the ZCDC ‘s valuators or its a deliberate ploy to grossly misrepresent the Zimbabwe diamonds for unknown reasons.

“The differences in reserve and market related prices are just too huge, 300 percent is too much and it’s either the team of valuators has no clue what they are doing or they are trying to pull some tricks,” said the valuator who requested anonymity.

Another source close to MMCZ said government then decided to sell diamonds worth $829 000 out of the possible $17 million which had bid prices exceeding the reserve prices pegged at $600, 000.

The remaining lot of diamonds was in the past few days put back on sale through a selective bidder listing.

“The diamonds which were not sold last time are what we call sterilised or distressed diamonds and the issue is that they will fetch an even lower price than they did because the buyers know for a fact they are the same stones. They will make even lower bids and it’s our loss,” said the source.

According to the source, Zimbabwe’s diamonds on the market are of a poorer quality because ZCDC recovered them from previously worked tailings dumps.

“These diamonds are from tailings or dumps, all the valuable high quality gem stones were taken out already during the first pass.

ZCDC requires freshly mined diamonds to get more valuable stones so that they can obtain competitive prices,” added the source.

According to diamond experts in Zimbabwe, Government officials and ZCDC management should refrain from divulging information and talking recklessly on its diamond stockpiles in order to attract better and higher bids.

Questions around ZCDC’s capacity come amid concerns a diamond processing deal with Botswana might well have been oversold, and that it would be better to process diamonds within Zimbabwe.

ZCDC plans to send Zimbabwe’s diamonds to Botswana for cleaning, marketing and cutting and polishing.

This, according to sources close to Diamond Trading Company (DTC) Botswana is illogical and is likely to prejudice Zimbabwe of its hard earned diamond revenue

DTCB is a 50-50 joint venture between the Government of Botswana and DeBeers.

“Anyone who has links in Botswana’s diamond industry knows that DeBeers has seen Zimbabwe as a threat for a very long time now. Ask any senior manager in Botswana and if they are honest enough, they will tell you that an organised diamond industry in Zimbabwe is a huge threat to Botswana’s diamond industry. It’s just naïve to then depend on them, they will make sure they kill the Zimbabwe diamond industry because it is their competitor, period. In the history of diamond mining, you will find mines which have been made to fail by competition one way or the other.

Zimbabwe is the eighth largest diamond producer in the world with 4, 7 million carats produced in 2014, according to industry group Kimberly Process, but critics believe proceeds from the diamonds could have benefited very few, mostly politicians.

In 2018, production is projected to hit 3 million carats, up from 1, 8 million carats last year. The ZCDC says it requires about $187 million to ramp up production.

From March to December the same year ZCDC accumulated a diamond stockpile of 1, 558 million carats which are now up for sale.

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