Govt diamond merger ZCDC on brink of collapse

March 29, 2021

The future of the state-owned diamond miner, Zimbabwe Consolidated Diamond Company (ZCDC), looks bleak owing to loss of concessions and government interference among other factors, investigations have revealed.

Kenneth Matimaire

Mutare—The ZCDC’s economic fortunes took a nosedive after Anjin Investments, an outfit bringing together Chinese and local military interests, grabbed the merger’s most productive concession in Manicaland province’s Marange diamond fields.

Anjin’s former general manager, Shingi Manyeruke, confirmed in an earlier investigation by The Zimbabwe Independent working in collaboration with Information for Development Trust (IDT)—a non-profit media organisation supporting journalists to probe corruption—that they took over the lucrative Portal B from ZCDC.

Mysterious departure

Manyeruke further acknowledged that Anjin was a 50-50 partnership between the Chinese Anhui Foreign Economic Construction and the Zimbabwe Defense Industries through its investment vehicle called Matt Bronze.

But, after those revelations during our investigation published in mid-January this year, Manyeruke is leaving Anjin under unclear circumstances, The Zimbabwe Independent has established.

He confirmed his imminent departure but did not specify the reasons behind the move, referring all queries to the company secretary and the acting deputy general manager.

“I’m in the process of disengaging (from Anjin) therefore for now, limited involvement (sic),” said Manyeruke in a Whatsapp message.

The ZCDC was a merger of some diamond mining companies which was established following the 2016 expulsion of former miners that the administration of the late ex-president, Robert Mugabe, accused of serious impropriety.

Information obtained by this publication reveals that ZCDC’s operations were facing severe challenges that severely threatened its viability.

This follow-up investigation that was also supported by IDT has revealed that ZCDC has stopped operations in four of its concessions and abandoned three of the four sites where it was exploring for diamonds.

With the rich Portal B already gone to Anjin, the company’s recently updated website shows that ZCDC operations are now limited to Portal A in Marange and Portal E in Chimanimani.

The latter, however, is “under mineral resource evaluation”, and this technically limits ZCDC’s real production to Portal A only.

In 2020, ZCDC operations spanned five relatively productive concessions.

The affected concessions include Portal D (Marange) and R (Beitbridge) where operations commenced in the second quarter of 2018 as well as Portal C (Marange) where operations started in the fourth quarter of the same year.

Operations in Portal Q in Marange have also ceased as there was a “high stripping ratio which made it sub-economical to mine,” according to the company website.

The withdrawal from and closure of several concessions exacerbated by unsuccessful explorations have serious implications on ZCDC’s annual production, which at one time the company projected to reach a 10 million carat output by 2023.

The new ZCDC chief executive officer, Mark Mabhudhu, was not forthcoming with further information on the collapsing company, saying, “As you would know, this is very confidential information that you are requesting to publish, which requires certain approvals as appropriate to be released.”

Mabhudhu, on several occasions, promised face to face or virtual meetings but they did not materialise because he would repeatedly ask for postponements saying he was busy.

Blackout

From inception, ZCDC used to release its annual results in January every year but, since Mabhudhu took over in late 2020, that has not been the case.

ZCDC produced 0,9 million carats in 2016, which rose to 1,8 million in 2017 and 2,7 million carats in 2018 before dropping to 1,6 million carats in 2019, against a set target of 3 million carats.

Investigations highlighted that diamond production was closely linked to the number of concessions the miner had access to during a particular year, in addition to its investment in conglomerate mining that has gradually replaced alluvial extraction that was common in the past when surface diamonds were easily found.

In 2016, ZCDC took over Portal A from the ejected Mbada Diamonds, Portal B (Marange Resources), Portal D (Kusena), Portal E (DTZ–OZGEO), Portal G (Gye Nyame), Portal Q (Diamond Mining Company), Portal C & L2 (Anjin), Portal J, 12 & K (Jinan) and Portal L1 (RERA Diamonds).

Information gathered from the company’s annual reports indicated that ZCDC managed to produce a paltry 961 537 carats in the commencement year as production was only limited to two concessions, Portal B and Q.

The other concessions, Portal L1, D, E and G were under exploration while portals A, C & L2, and J, K 12, K were under legal contest.

The former ZCDC acting board chairperson, Slava Grace Chella – who is still a board member –indicated in the 2016 annual report published in 2017 that they produced less owing to “limited access to concessions which were mined by previous miners.”

The 2017 annual report went on to link its production boost of 1,8 million carats to the increase in concessions to four portals, namely Portal A, B, E and Q.

Nearly 70% of the production came from Portal B, now under Anjin.

Company records further indicated that ZCDC invested US$15 million in a 450-tonne-per-hour conglomerate-processing plant installed at portals A and B, which saw production peaking at 2,7 million carats in 2018.

The following year, ZCDC lost ownership of the most productive concession Portal B to Anjin – which accounted for an average of 70% of its output. It also suspended operations in Portal Q.

As a result, production plunged to 1,6 million carats in 2019.

“All is not well here (ZCDC),” said an insider. “The new boss (Mabhudhu) joined a sinking ship. There is a mass exodus of personnel. They are protesting against the handing over of Portal B to Anjin because that was our most valuable asset.”

“The company was making huge investments in the concession as it was setting up machinery to extract deep-seated gems, but all that was not considered,” added the insider as efforts to explore for minerals resources to compensate for concessions lost has been “costly and unproductive.”

Investigations further revealed that its ambitious explorations worth US$20 million were yet to bear fruit.

Diamond explorations were supposed to take place in Chihota, Penhalonga, Mwenezi and Katete but only the first zone is now being considered. Wengezi and Chikara are being treated as tentative sub-projects, but company employees view this as another chase up the slope.  

The company’s former acting chief executive, Roberto De Pretto left the state miner barely five months after the board members tendered their resignations en-mass, in protest against government interference and surrender of valuable assets such as Portal B.

When he resigned, though, the official line was that he wanted to rejoin his family outside Zimbabwe.

OPC interference

The Office of the President and Cabinet (OPC) constantly moved in to frustrate the sale of diamonds, thereby heavily incapacitating the firm, according to De Pretto in an earlier interview.

“In 2016 and 2017 there were no sales. We were slapped with a year-long moratorium the whole of 2017. In 2018 we had four sales only. This was our first time selling diamonds in almost three years. We were looking at 10 sales the following year (2019) but we ended up having four sales again.

“At the beginning of the year (2020), we were planning to have sales every month because with sales comes revenue. We are a company that need sales to fund the business, the working capital. If you don’t have a sale, there is no revenue coming in,” he claimed.  

“We had one or two sales in the beginning of the year. Then there were some concern around the way the sales were being handled, and a five-month suspension of all sales was imposed in March, by the Office of the President,” lamented De Pretto a few months before he left ZCDC.

De Pretto also indicated that, by the time the moratorium expired, ZCDC could not conduct any sale owing to the Covid-19 induced lockdown that affected global trends.

Therefore, 11 local and international sales that were planned by the state miner could not materialise.

Even if ZCDC got to sell its gems, it would not attract reputable bidders as the US Customs and Border Protection has issued a Withhold Release Order against Marange dimoands due to “evidence of forced labour.”

This has seen many global buyers turning their backs on ZCDC, with top American jeweller, Blue Nile, recently taking the first step to blacklist ZCDC, citing gross human rights abuses in the extraction of its gems.

“Because of the reported human rights abuses in Zimbabwe’s Marange diamond district, Blue Nile will not purchase or offer diamonds from that area,” it stated on its website.

The top jeweler further threatened to blacklist any of its suppliers that acquire the gems.

ZCDC, which is sitting on an undisclosed huge stock of gems, confirmed in earlier correspondence that it was struggling to find markets for its precious stones outside China, Dubai and India.

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