Harare – Diamond mining companies ordered by President Robert Mugabe's government to stop gem mining operations in Eastern Zimbabwe are weighing their options, while some have started engagements for litigation against the decision.
Zimbabwe Mines and Mining Development Minister Walter Chidakwa on Monday said all diamond mining activities in Marange and Chimanimani have to stop. He requested that the diamond miners - which are mostly partnerships between Chinese and other investors and state-owned companies - hand over the mines to the state.
Mining sources have now told Fin24 the affected miners are scrambling for a way out of this. Among the options being pursued are litigation against the government's decision, while others have already started to slow down operations in anticipation of the shutdown as their operating licences were not renewed.
"Some of the companies have already started deliberations for litigation and they are not taking this lightly. It's another setback for the investment climate... this will worsen the regulatory framework and the ease of doing business because of policies that always change after investors commit funds," said a knowledgeable source in Zimbabwe.
Mugabe's government is consolidating the diamond mining industry in the country into one company, in which the state will own half the shares. However, there has been resistance to this, prompting the government to close them down amid concerns over lack of transparency in revenue from the country's diamond mining.
“Consultation with the existing diamond companies which took over seven months to allow for extraordinary shareholder general meetings achieved no consensus between government and the companies on the consolidation issue.
"Marange Resources, DMC, and Jinan-held WGMs... Marange Resources accepted the proposals (while) DMC and Jinan decided against the proposals.
“Mbada and Anjin have been dragging their feet and have up to now not formally made their decision. The investors in the joint venture companies, Dradwell and OFECC, made unilateral submissions to the government opposing consolidation proposals,” Chidakwa said in Harare on Monday.
Sources in the mining industry said there is a lack of clarity on mining policies in Zimbabwe, with companies also required to be compliant with indigenisation laws that require foreign investors to cede 51% of shares into the hands of black Zimbabwean groups.
“We continue to engage the government on issues such as these and we have always requested policy clarity and restoration of certainty and property rights. Policy positions just change overnight and it is difficult to convince company boards to commit to further investments, let alone greenfield investments,” a mining executive said.
The decision by the government to merge diamond firms into a state company could also have forced Rio Tinto to exit Zimbabwe. The international diamond miner disposed of its majority stake in the Murowa diamond mine in Zimbabwe last year.
Chidakwa said the joint venture companies were mining diamonds in Zimbabwe “illegally” as the “permits which had been granted expired and were not renewed” over the past five years.
The special grants for mining diamonds awarded to Anjin, DMC, Jinan, Mbada Diamonds, DTZ-OZGEO, Rera, Gye Nyame, Kusena and Marange Resources also expired and the companies have now been given three months to wind down operations.