Tanzania: Petra Suspends Mining After Diamonds Seizure By Tanzania

Photo: Daily News
Finance and Planning Minister, Dr Philip Mpango, centre, gets clarification on diamonds impounded at the Julius Nyerere International Airport on August 31. Looking on are: Prof Abdulkarim Mruma, 2nd right, Tanzania Revenue Authority Commissioner General Mr Charles Kichere, partly obscured - 3rd right, Deputy Director General of the Prevention and Combatting of Corruption Bureau Brigadier General John Mbungo, 4th right, and the Director of Public Prosecutions Biswalo Mganga (immediate right to the Minister).

Tanzania's Petra Diamonds has suspended operations at one of its mines after running afoul of President John Magufuli's administration.

Petra becomes the second firm, after Acacia, to have its minerals seized.

Last week, Tanzania announced that it would nationalise the diamond consignment owned by Petra that was en route to Belgium after the government claimed it had been under-declared by more than $14.8 million.

"While Williamson Diamonds declared in its documentation that the value of the diamonds was $14.798 million, a fresh valuation done by the government established that the actual value of the diamonds is $29.5 million. Legal actions to be taken include nationalisation of all the diamonds seized if it is established that there was cheating involved in declaring the actual value of the minerals," Tanzania's Finance and Planning Ministry said in a statement.

The diamond miner in its reaction to the seizure, and subsequent questioning of its employees as part of an investigation into the country's mining industry said it is be suspending its operations for safety and security reasons. Petra, however, said it would engage the government in order to resolve the issue.

"Petra confirms that a parcel of diamonds (71,654 carats) from the Williamson mine in Tanzania has been blocked from export to Petra's marketing office in Antwerp and certain key personnel from Williamson are being questioned by the authorities. However, the grounds upon which these actions have been taken have not been formally made known to the company as yet," the company said.

Kimberly Process

The firm denied that it had under-declared the value of diamond consignment and noted that all its mine operations are conducted transparently and in compliance with Tanzanian laws and the Kimberly Process.

The Kimberly Process is a government-led certification scheme, initiated to clean up the diamond trade. It requires member states to set up an import and export control system for rough diamonds.

"Tanzania has complete oversight over the diamonds produced at the mine, which are physically controlled by a number of different government representatives in conjunction with Petra from the point of recovery until the point of sale," it said.

Scaling down

"We are not responsible for the provisional valuation of diamond parcels before they are exported as this is carried out by Tanzania's diamond and gemstone valuation agency. This provisional valuation is used to calculate the Company's provisional royalty payments to the government. However, adjustments to final royalty payments based on the actual sales proceeds for the diamonds, once sold, are then made at the end of the tender process."

The valuation documents seen by The EastAfrican show that the firm's 30-day permit for exportation of the stones was granted in Shinyanga and signed by the Commissioner of Mines on August 29.

According to the certificate, the consignment was to be exported through the Julius Nyerere International Airport to Belgium.

The shipment invoice shows that the 14.5kg consignment was mined between June 8 and August 22 this year, while it paid an inspection and clearance fee of $147,989, being one per cent fee of the total value of the consignment, to the Tanzania Treasury on August 29.

It also received a valuation certificate from the Ministry of Energy and Minerals detailing the consignment's weight and contents prior to the seizure.

The Williamson mine, is majority owned by Petra (75 per cent) and 25 per cent owned by the Tanzanian government.

In a statement, the firm said that this scaling down will see a significant reduction in its workforce covering the current 1,200 employees and 800 contractor roles.

"The process of moving to a reduced operational state will be completed in three months and will include one-off costs of up to $25 million in addition to the natural unwinding of around two months' worth of working capital approximately $35-40 million)," the firm said.

Petra said this will include preservation of assets and equipment to enable the mine to resume operations should the export ban be lifted and the operating environment stabilised.

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