Marange: Consolidation not the answer
By Eddie Cross
Diamonds were discovered in the Marange area in 2000 by an exploration team from De Beers Limited.
The claims were taken over in 2006 by a London-based company African Consolidated Resources (ACR). ACR revealed the presence of gem quality diamonds almost immediately.
In September 2006, just three months after registering their claims, understanding the significance of the discovery, ACR proposed a similar arrangement to the Ministry of Mines for the exploitation of the fields as that used in Botswana through a joint venture between the state and De Beers mining company.
For unknown reasons, this proposal was rejected by the ministry and ACR was forcibly removed from the claims which were then taken over by the Zimbabwe Mining Development Corporation (ZMDC), even though they had no expertise or the required capital to exploit the discovery. The ministry immediately opened up the area to small-scale miners without restriction.
The people of Marange District and many others took up this opportunity, discovered that alluvial diamonds had real value and a huge expansion of informal diamond mining activity began.
In late 2008, a military operation was mounted during which several people were killed and thousands of local diamond miners driven off their claims. This exercise was carefully and ruthlessly carried out and was designed to restore state control over the fields.
Within a very short period of time, five companies were formed — Mbada Diamonds, Anjin, Canadile, the Diamond Mining Company (DMC) and Marange Resources. The latter was owned 100% by the state corporation ZMDC and the others were 50/50 joint ventures. The local or international partners in each of these companies were not disclosed.
Of this list, only Canadile has had its rights revoked for reasons that are still unclear. Their claims are being mined by the ZMDC under the auspices of Marange Resources. The activities of these groups on site remain clouded in secrecy and it is clear that no accurate consolidated figures of production exist for the area.
We have no idea of the magnitude of production from 2006 to 2008, but reports from Manicaland and Mozambique indicate that output was considerable and sales of individual stones for US$75 000 or more quoted. The Mines ministry quoted eight million carats in a statement made in 2009 and that might be reasonable.
In 2009 the installed processing capacities of the three majors — Marange Resources, Mbada and Anjin — were thought to have been raised to the following magnitude: Marange Resources 50 tonnes an hour; Mbada 150 tonnes an hour and Anjin 500 tonnes an hour.
These estimates were based on the planned throughput of sand carrying alluvial diamonds of the South African equipment installed on site. No estimates are given for the DMC so let’s assume 50 tonnes an hour — the same as Marange Resources.
This gives the combined capacity of all four companies as 750 tonnes an hour — again this looks reasonable from the reports we have of the scale of operations and the other equipment on site such as mechanical excavators, heavy duty dump trucks and bull dozers. Assuming they worked an 18-hour day, then this system could have processed five million tonnes of alluvial deposits a year.
Satellite images captured over the period from 2006 to 2012 show very extensive workings over some 80 000 hectares of land in the Marange area.
Diamond yields varied from site to site, at the core of the deposits, yields of up to 20 carats per tonne were recorded, in the poorer areas yields fell to 1 or 2 carats per tonne. The quality was universally poor — 80% industrial and 20% gem quality.
Average prices recorded ranged from US$3 per carat to thousands of dollars for large, good quality stones. At least one gem stone was processed and sold in Vietnam for US$10,6 million.
Taken overall, it is possible that output from the field was 120 million carats in the five years from 2009 to 2013. Output is thought to have peaked in 2012. The total value is impossible to calculate, but data obtained from Mbada in 2012 indicated that their average sales value was US$386 for gem quality stones and between US$3 and US$67 per carat for industrial quality stones.
This suggests an average price of about US$105 a carat across the range. That suggests the total quantum of diamond sales from Marange between 2008 and 2014 was something over US$12 billion.
Global sales of raw diamonds are thought to be about 120 million carats a year.
Debswana Limited supplies a third of this volume and the Mines minister has been on record saying that Zimbabwe could supply a quarter of global demand — this fits with the 35 million carats per annum estimates.
Less is known about the remaining deposits at Marange — the major one is a sheet of agglomerate across much of the site which is estimated to contain 9 billion carats of raw diamonds and was clearly the source of the alluvial diamonds that are now exhausted. The agglomerate is a very difficult system to mine and extract the diamonds.
All companies on Marange have tried and failed. Anjin, in particular, has tried to break the technical barriers, but failed.
The original owners of Marange, ACR, claim that only Rio Tinto of London and De Beers have the capacity to mine the agglomerate. If that is the case, there is little purpose in bringing all four existing mining companies together with the ZMDC in an attempt to form a local Debswana and exploit the diamonds on site.
From recent audit reports, none of the four companies have any financial resources left (Mbada and Marange have combined debts of US$74 million and none has the technology needed.
Surely, its time to go back to sanity, pick up the idea mooted first by ACR and form a joint venture with De Beers and then join in with Botswana in a joint marketing and processing venture which will dominate world diamond trade for many years to come. This would boost state revenues and create the capacity to deal with our debt problems and start a long-term process of economic activity that could lift all Zimbabweans out of poverty.
Eddie Cross is an economist and MP for Bulawayo South. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail: [email protected] and cell +263 772 382 852