Zimbabwe News and Internet Radio

Funding Zim diamond miners risky: SA bank

By John Kachembere

HARARE – A leading South African bank says it is difficult to fund diamond mining ventures in Zimbabwe because of the high political risk and uncertainty in the country.

Two local workers at a diamond mine owned by Marange Resources in Zimbabwe
Two local workers at a diamond mine owned by Marange Resources in Zimbabwe (file picture)

Rand Merchant Bank (RMB)’s business development director Henk De Hoop said he believed this view was not exclusive to his institution, but that any credible bank would refrain from lending funds to a firm operating in a country with as much political uncertainty as Zimbabwe.

He said Zimbabwe has of late rescinded the licence of a diamond company and threatened not to renew those of others.

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“These policies leave mining firms unable to complete the work they borrowed money to carry out and hence they are unable to pay their financiers back for said funds,” De Hoop noted, adding that, “in such a case, banks have no way of recouping their loans.”

“You as a bank have nothing (you can do) if a company decides to stop paying you back because they have lost a mining licence,” he said. “It needs to have that comfort, it’s one of the base rules and those base rules have been thrown out of the window essentially and the (Zimbabwean) government has not been consistent in that message either,” added De Hoop.

This comes as leading diamond mining firms in the southern African country are struggling against dwindling deposits and liquidity crunch, stoking fears that the mining sector boon that sustained the country’s near double-digit economic growth in the past four years might soon end.

Zimbabwe’s diamond mining concentrates in the eastern region of Marange, near the border with Mozambique. There are seven companies licensed to mine diamonds in Marange fields, accounting for more than 80 percent of the country’s diamond output, which is estimated to have reached 11 million carats in 2013.

Diamond Mining Company (DMC), a joint venture between Pure Diamond of the United Arab Emirates and the State-owned Zimbabwe Mining Development Corporation (ZMDC), said alluvial diamond deposits at its claim were diminishing.

“Yes, they are running out. We do not have any conglomerate or kimberlitic deposits.

“We are mostly doing alluvial and the grade is going down. The resources are greatly depleted and we are facing a challenge in production,” DMC general manager Ramzi Malik agencies early in the year.

He said the available reserves could only last them two to three years, adding that the company had since asked government for a new concession.

The government says Zimbabwe holds estimated diamond reserves of 16,5 million tonnes.

But mining officials have hinted that they will not consider giving mining firms new concessions until the existing ones are exhausted. Anjin Investment, a 50/50 joint venture between China’s Anhui Foreign Economic Construction Company and the ZMDC, also complained that it was facing serious financial problems as a result of depleting diamond reserves at its claim.

Anjin board member responsible for corporate affairs Munyaradzi Machacha told a parliamentary committee that the company, which employs about 850 people, was struggling.

“The company is in survival mode. Our resources have dwindled and we are receiving low grade diamonds. Our prices are the lowest in the Marange diamond area,” Machacha said. Daily News