First Element offers govt some sweetner

Source: First Element offers govt some sweetner – The Zimbabwe Independent July 22, 2016

GOVERNMENT’S partner at the Zimbabwe Diamond Tender Facility (ZDTF), First Element Diamond Services (First Element), has offered to hand over for free its deep boiling plant to the ministry of mines free of charge amid growing scrutiny into the company’s operations in the country.

Taurai Mangudhla

Insider’s view the move to relinquish the facility, previously valued at US$1 million, as a desperate attempt by First Element to offer a sweetener and thaw relations with government while silencing criticism on the company’s alleged conflict of interest and other irregularities. The value of the facility has come down to US$500 000. First Element is also a major diamond buyer and is involved in cutting and polishing of the precious stones.

Documents seen by the businessdigest show First Element offered to sell the deep boiling plant, located at the ZDTF on the first floor of the Minerals Marketing Corporation of Zimbabwe (MMCZ), to the government minerals marketing aim for US$500 000 early 2015.

In a letter to Mines minister Walter Chidhakwa and his permanent secretary Francis Gudyanga, First Element said MMCZ failed to take the offer due to lack of funds, prompting First Element to review the terms to a build-own-transfer (BOT) deal.

Under the BOT deal, First Element would finance the whole project, commission the laboratory and transfer ownership to government upon full payment for the cleaning facility. This has failed to take off as government could not pay for the plant since it was commissioned in July 2015.

The offer was reviewed to a point where First Element settled for a minimum capital recoupment of US$365 596,82.

In March 2016, First Element’s only competitor in the diamond cleaning business in the country, Kenako Diamonds, offered to buy the facility for US$350 000, structured with a down payment of US$50 000 and thereafter the balance at US$50 000 per month for six months, but First Element valued the facility and its intellectual property at US$500 000.

First Element, according to the letters, suggested that Kenako look at a part payment structure in which US$250 000 would be paid in cash for 50% shares after which the balance would be paid under flexible terms.

Kenako is understood to have expressed reservations on the proposal, prompting negotiations with authorities which were held late May. These negotiations are yet to bear fruit.

Currently, First Element maintains it stands guided by Chidhakwa and his permanent secretary’s decision.

A source close to the developments said MMCZ deputy general manager Richard Chingodza was suspended twice by Gudyanga for not being amenable to a number of issues, including the purchase of First Element’s boiling plant. Chingodza earlier this week said First Element claims to have incurred a cost of US$400 000 to set up the plant, adding MMCZ incurred huge loses in the diamond tenders run by First Element.

First element country director Tim Wilkes said his company was instructed by the Mines ministry to build the Deep Boiling facility.
He said the facility had cost his company US$373 000 to set up.

“It is not possible to compare the cost of the two cleaning facilities at the MMCZ as they are worlds apart and incomparable. It is also not professionally correct to malign any of our competitors, but since you are asking why our facility cost more we would like to put on record what is in our facility and not in our competitors,” said Wilkes.

He said the comment around donating the facility to government was taken out of context and was a rebuttal to competitors offering “a very low almost insulting amount to purchase our facility, with us indicating that it would be like giving away the facility, so why not rather donate it. Our relationship with government remains professional, open and transparent.”