REPORT: Kimberley Process review mission to Zimbabwe

http://www.zimonline.co.za

Thursday 29 October 2009

KIMBERLEY PROCESS CERTIFICATION SCHEME REVIEW MISSION TO ZIMBABWE, 30 JUNE -
4 JULY, 2009, FINAL REPORT

MEMBERS OF THE REVIEW MISSION TEAM:

CHAIR: LIBERIA - Represented by Deputy Minister A. Kpandel Fayia

MEMBERS:

CANADA: Represented by Abdul Omar

EUROPEAN OMMUNITY: Represented by Clementine Burnley

NAMIBIA: Represented by Kennedy Hamutenya and Desiderius Reinhold

SOUTH AFRICA: Represented by Martin Mononela and Garfield Chounyane

UNITED STATES OF AMERICA: Represented by Brad Brooks-Rubin

WORLD DIAMOND COUNCIL (industry): Represented by Cecilia Gardner

GREEN ADVOCATES (civil society): Represented by Alfred Brownell

TABLE OF ABBREVIATIONS

EC - European Commission

KP - Kimberley Process

KPC - Kimberley Process Certificate

KPCS - Kimberley Process Certification Scheme

MMCZ - Minerals Marketing Corporation of Zimbabwe

MMMD - Ministry of Mining and Mining Development

PC - Participation Committee

RBZ - Reserve Bank of Zimbabwe

RV - Review Visit

UAE - United Arab Emirates

WDC - World Diamond Council

WGDE - Working Group on Diamond Experts

WGM - Working Group on Monitoring

WGS - Working Group on Statistics

ZIMRA - Zimbabwe Revenue Authority

ZMDC - Zimbabwe Mining Development Corporation

ZNA - Zimbabwe National Army

ZRP - Zimbabwe Republic Police

I. INTRODUCTION

Pursuant to the Mandate established by the Working Group on Monitoring
 ("WGM"), a team of 10 individuals conducted a Review Mission to Zimbabwe
from 30 June - 4 July, 2009. A copy of the Mandate is attached as Appendix
A. Liberia, represented by A. Kpandel Fayia, Deputy Minister for Planning
and Development in the Ministry of Lands, Mines, and Energy, served as Chair
of the Review Mission. Other members of the Review Mission included: Canada
(represented by Abdul Omar); the European Community (represented by
Clementine Burnley); Namibia (represented by Kennedy Hamutenya and
Desiderius Reinhold); South Africa (represented by Martin Mononela and
Garfield Chounyane); the United States of America (represented by Brad
Brooks-Rubin); the World Diamond Council ("WDC")/industry (represented by
Cecilia Gardner); and Green Advocates/ civil society) (represented by Alfred
Brownell) ("The Review Team"/"the Team").

The Team wishes to express its appreciation to the many members of the
government of Zimbabwe who facilitated the work of the Review Team,
particularly Mr John Makandwa of the Ministry of Mines and Mining
Development. The size of the Review Team made the logistics alone quite a
challenge, which were met with great care and cooperation. The Review Team
also wishes to thank the KP Chair and WGM Chair for their significant
efforts in insuring that the Review Team was formed and was able to complete
its assignment.

A. BACKGROUND ON KP PEER REVIEW OF ZIMBABWE

The KP has conducted two Review Visits of Zimbabwe, in 2004 and in 2007. The
2004 Review Visit ("2004 RV"), led by Canada, was undertaken prior to
Zimbabwe's commencement of rough diamond export or import activity, and at a
time when Zimbabwean mines were not in production. As such, the
recommendations of the 2004 RV were limited and focused primarily on certain
aspects of the operations/functions of the Minerals Marketing Corporation of
Zimbabwe (MMCZ) within the Zimbabwean diamond sector, including the
potential for an independent audit process and issuance of a warranty to
maintain compliance with the WDC system of warranties. Overall, the 2004 RV
concluded that, although difficult to determine for a non-active
Participant, "Zimbabwe has in place a system that is capable of fulfilling
in a satisfactory manner its undertakings under the KPCS." (2004 RV Report,
p. 12).

The 2007 Review Visit ("2007 RV"), led by Russia, was undertaken in the wake
of concerns stemming from the first diamond rush at Marange, which began in
2006. The 2007 RV visited each of the three production sites and met with a
range of government and industry officials, as well as representatives from
the United Nations Development Programme and Federation of Small Miners.

The 2007 RV concluded that "the overall structure of the implementation of
the KP Certification Scheme appears to be working in a satisfactory manner
in Zimbabwe, and, in general, meets the minimum requirements of the KPCS."
Given that Zimbabwe was fully active at the time, the 2007 RV
recommendations were more extensive than in 2004 and focused on several key
areas. First, the 2007 RV recommended that Zimbabwe make its legal framework
less cumbersome and more transparent and concise. Second, Zimbabwe needed to
"[continue] on with its efforts to keep the situation in the diamond
producing areas, first and foremost in and around Marange, under its
permanent control."

Third, several technical/detail recommendations were made concerning
statistics and the operation of the MMCZ. Finally, the 2007 RV recommended
that the KP Plenary consider "ways and means" to combat smuggling,
specifically focusing on the potential for the development of footprints to
demonstrate the origin of stones.

B. BACKGROUND ON EVENTS LEADING TO ESTABLISHMENT AND COMMENCEMENT OF REVIEW
MISSION

A summary of the background on the basis and process for the establishment
of the Review Mission is set forth in the Review Mission Mandate, as
follows:

In November 2008, the Delhi Plenary 'noted with concern the continuing
challenges to Kimberley Process Certification Scheme (KPCS) implementation
in Zimbabwe and recommended further monitoring and concerted actions in this
respect'. The Working Group on Monitoring (WGM) further discussed reports of
violence in relation to operation 'Hakudzokwi' and indications of renewed
widespread smuggling in the Marange area and, in January 2009, adopted
recommendations for KP specific actions, e.g. a public statement, regional
concerted actions and the introduction of 'enhanced vigilance measures',
based on a footprint prepared by the Working Group of Diamond Experts
(WGDE), to ensure the containment of illicit diamonds from Marange.

Furthermore, WGM experts prepared a report highlighting instances of
smuggling and seizures, statistical anomalies as well as widespread violence
and concluding that implementation of internal controls in Marange appear to
be ineffective. The WGM also considered a report by Zimbabwe authorities on
the situation in Marange that refutes reports of violence and asserts that
the situation 'has now been contained'.

The KP Chair visited Zimbabwe on 16-18 March and conveyed the KP concerns at
the highest level. Subsequently, the KP Chair issued a public statement to
emphasise KP 'growing concerns' at the violence and smuggling and to urge
Zimbabwe authorities to put an end to the violence in Marange and bring the
area under control through adequate and proportionate measures.

The KP Chair also agreed with Zimbabwe that additional verification measures
in accordance with Section VI, Paragraphs 13 to 15 of the KPCS, and Section
III, Paragraph (a) of the Administrative Decision on Implementation of Peer
Review in the KPCS (ADPR) would help clarify the situation. Further to its
Teleconference on 7 April 2009, the WGM recommends that, consistent with the
provisions outlined in Section 1 of the ADPR, the Review mission to Zimbabwe
could be mandated to - conduct an overall assessment of KPCS implementation
in Zimbabwe in line with the standard provisions for review visits/missions
under the ADPR;

-- assess in particular concerns regarding the implementation of internal
controls including related reports of violence and smuggling in/from
Marange;

-- discuss specific statistical issues identified by the KP (eg trade flows,
'stockpile' . . . );

-- formulate recommendations on further action as may be required.

In addition, following the conduct of written procedure by the Chair, an
oral vote was taken on 25 June, 2009, at the Windhoek Intersessional to
provide final authority for the commencement of the Review Mission. The
decision to establish the Review Mission was approved by a unanimous vote of
the Participants present at Interessional.

At the Windhoek Intersessional, the WGM also heard a presentation from Mr
Jon Elliot of Human Rights Watch, which released a report concerning Marange
during the week of the Intersessional. Both the WGM and Review Team had the
opportunity to pose questions to Mr Elliot. This WGM session prompted a
focused discussion of the programme for the Review Mission, which still had
not been finalised. Zimbabwe indicated to the WGM that it had not come to
final decisions on a number of requested meetings. Following discussions
facilitated by the KP Chair, Zimbabwe and the Review Team developed a final
agenda.

Deputy Minister of Mines and Mining Development Murisi Zwizwai presented
remarks at the Windhoek Intersessional. A copy of his prepared remarks is
attached as Appendix A. In sum, the Deputy Minister echoed the statements
and assertions made in the February 2009 report from Zimbabwe to the KP
Chair and in the Zimbabwe Annual Report for 2008 to the KP that: the reports
of violence at Marange were exaggerated; Zimbabwean authorities had not used
violent means to disperse the rush of illegal miners, and Zimbabwean
authorities were not involved in on-going activity of a violent nature or
that otherwise contributed to illegal diamond mining or trading activities.
Deputy Minister Zwizwai also reiterated Zimbabwe's commitment to the KP, its
need for technical assistance, and its interest in further commercial
investment in and development of Marange.

C. CONDUCT OF REVIEW MISSION

As set forth above, the Review Team, in conjunction with the Government of
Zimbabwe, established an ambitious programme to cover the full range of
issues set forth above in the Mandate. The Team spent two days conducting
meetings and interviews in each of Harare and Chiadzwa/Mutare (Mutare being
the city closest to Chiadzwa); the Team also spent one day visiting both the
Murowa and River Ranch Limited mines.

A copy of the final agenda is attached as Appendix B. Meetings were held
with representatives from each of the three pillars of the KP: at least 8
government agencies and parastatal companies; private industry; and civil
society. A formal close-out session was held on 4 July, and the prepared
points for that session were provided to the Government of Zimbabwe.

In general, the Team received cooperation from the Government of Zimbabwe,
and all requests for meetings were granted, including with MP Shuah Mudiwa,
whom the Team met in a prison in Mutare. In addition, all conditions
established by the Team for certain meetings, e.g. that there be no
representatives present from the Government, were respected.

Further, prior to and during the Review Mission, the Team received verbal
assurances that there would be no consequences for anyone who met with, or
otherwise provided information to, the Team. As described further, however,
these latter assurances do not appear to have been completely respected in
at least one instance.

D. BACKGROUND TO STRUCTURE AND SUMMARY OF FINDINGS OF REPORT

In order to more directly address the Mandate of the Review Mission, the
following report begins with a general discussion of internal control and
statistics, as well as the particular concerns about Marange, and then is
presented in sections corresponding to the minimum requirements of the KPCS.
Rather than being structured in the format more typically associated with
Review Visit reports, the Review Team believes that this more directly
addresses the Mandate and will facilitate more fruitful discussion and
analysis of the report.

In preparation for the Review Mission and in the completion of this report,
the Review Team took note of reports by the WGM Experts, the European
Commission, Partnership Africa Canada, and the aforementioned Human Rights
Watch report. The Team also reviewed Zimbabwe's annual reports to the KP,
annual WGS statistical analyses, and a regional statistical analysis study
conducted by the European Commission's Joint Research Centre.

During the Review Mission, the Team also received and reviewed reports
prepared by the Zimbabwe Republic Police and a coalition of Zimbabwean civil
society organisations. However, all information set forth in this report is
based on information collected and observed by the Review Team during or, in
limited cases, following the Review Mission.

In addition to comments presented to the Government of Zimbabwe during the
14 July close-out session, the Team prepared an "interim update" to the WGM
and KP Chair as a means to facilitate immediate discussion of the Review
Team's findings within the KP and to provide an immediate summary of
findings and recommendations to the Government of Zimbabwe. Copies of the
notes prepared for the close-out and the Interim Update are attached as
Appendices C and D. An initial response by the Government of Zimbabwe to the
close-out session dated 14 July was sent to the Review Team and is included
herein as Appendix E.

In sum, the Review Team assesses that there are concerns with Zimbabwe's
compliance with at least one or more aspects of three of the four sections
(sections II, IV, and V) of the KP document that comprise the minimum
requirements. KP document annexes expanding on these minimum requirements
have been considered. Although reflected in certain discussions, the Review
Team has not provided analysis of Zimbabwe's compliance with the full array
of administrative decisions, technical guidelines, or other recommendations
established by the KP, as these do not necessarily reflect minimum
requirements. Discussion and explanation for these findings follow, as do
suggested recommendations for both Zimbabwe and the KP.

II. FRAMEWORK AND OVERVIEW OF INTERNAL CONTROLS AND STATISTICS

Although extensive information concerning framework and internal controls
has been presented in the 2004 and 2007 RV reports, a summary is presented
here as a basis for evaluating the Team's conclusions on Zimbabwe's
compliance with minimum requirements. Certain updates to previous reporting
are also included.

A. Overview

There remain three sources for diamonds in Zimbabwe: Marange (located in the
Chiadzwa area), Murowa (located in Zvishavane), and River Ranch Limited
(located in Beitbridge). The Murowa and River Ranch mines are privately
owned and operated. The company operating at Marange is government-owned, as
further described below.

The steps in order to export rough diamonds from Zimbabwe are complex and
involve at least five separate government agencies. The chronological order
of the required actions by each organisation is displayed by the attached
flow chart, obtained from one producer and largely identical to Annex F
contained in the 2007 RV report. The flow chart also references the laws,
regulations, and orders that govern each activity.

The 2007 RV report recommended that amendments be made to the overall KP
compliance system to make it "less cumbersome and more transparent and
concise."

Zimbabwe indicated in subsequent annual reports that new policy
recommendations were in place; however, the Team was informed that no action
on these recommendations has been taken.

B. Agencies and entities responsible for KP compliance

The Ministry of Mines and Mining Development ("MMMD") is assigned overall
administrative and management responsibility for the mining sector in
Zimbabwe.

It has five regional offices and two "satellite" offices. Further, it is
responsible for overall KPCS implementation and related policy. This
includes supervision of compliance by individual companies operating in the
diamond sector.

Individuals or companies dealing in diamonds are required to obtain an MMMD
licence under the Precious Stones Trade Act. In addition to the producing
companies, there are five licensed cutters and polishers in Zimbabwe;
however, because of certain legal issues, they are not yet permitted to
manufacture rough production from Zimbabwe and can only undertake cutting
and polishing of imported goods. Government authorities own or control at
least two of these licensed cutters/polishers: Aurex Ltd (a company owned by
the Reserve Bank of Zimbabwe, "RBZ") and Kimberworth Investments Ltd. (a
ZMDC company). Certain subsidiaries of the ZMDC are also licensed to deal in
rough diamonds pursuant to the Precious Stones Trade Act, including Marange
Resources, Kimberworth Investments, and Sandawana Trading. Marange Resources
and Kimberworth Investments are described further below.

The Ministry requires mine operators to provide reports of production on a
monthly basis. The reports are submitted regionally to the five regional
offices. The Mining Ministry issues operating licenses and grants (depending
on the size and sector) and further, facilitates the granting of export
documentation, through parastatal mechanisms, further described below.
Finally, the Mining Ministry issues export permits for rough diamond
shipments; beginning in 2009, MMMD charges US$3,000 for each export permit.

The Minerals Marketing Corporation of Zimbabwe ("MMCZ") is a corporation
wholly owned by the government and created by state legislation. This is the
KPCS exporting authority and, in addition, is mandated by statute to sell
and coordinate the export for all rough diamonds, among most other minerals.

MMCZ maintains physical control of KP certificates and gathers production
and export statistics. In most instances, MMCZ acts as a selling agent on
behalf of a producer or related company, for which it receives a small
commission (0.875% of the value of the sale). MMCZ may also purchase rough
diamonds from a domestic producer outright and sell on its own behalf. On
every sale of rough diamonds, royalties are levied by the government in the
amount of 10%, which is paid to the Ministry of Finance (see below).

For Marange production only, tenders are held periodically in Harare. The
tenders are facilitated by the MMCZ on behalf of the operating company
Marange Resources, with domestic and international buyers participating. In
the May 2009 tender, MMCZ reported buyers participating from Belgium, Dubai,
Zimbabwe, the Democratic Republic of the Congo, India, and South Africa.
MMCZ indicated that previous tenders have included buyers from Russia and
Israel.

MMCZ also coordinated the "mop-up" operation described at length in the 2007
RV report, which was designed to purchase illicit diamonds connected to the
first rush on Marange. The MMCZ maintains this stockpile and has been in the
process of selling it off. In most cases, MMCZ sells these diamonds on its
own behalf, but in at least one instance (KP #0058, 27 March 2009), MMCZ
sold mop-up stockpile diamonds to Kimberworth Investments, which in turn
re-sold the stones to a purchaser in Belgium.

The Zimbabwe Mining Development Corporation ("ZMDC") is a holding company
created by an act of Parliament that invests on behalf of the government in
mining activities. It operates 26 separate companies (a mixture of wholly
state owned and joint venture entities) that mine platinum, gold, uranium,
chrome, emeralds, graphite, and diamonds.

In 2007, ZMDC was granted title and a series of "Special Grants," to the
mining rights for the area that includes Marange, comprising a total of 66
000 hectares. To date, a perimeter of 10km2 is partially fenced, with
additional fencing of the larger 66 000 hectare area in the planning stage.
The Marange production facility currently producing diamonds consists of a
2.5 km2 secured area within the 10 kilometer fenced area and the larger 66
000 hectare grant.

Marange Resources, Ltd. is the ZMDC subsidiary that formally conducts mining
operations at Marange;6 Kimberworth Investments is a separate subsidiary
used on occasion to sell Marange production. ZMDC provides marketing and
selling services for Marange production, including finding customers and
controlling exports. ZMDC officials indicated that efforts to subdivide, and
attract private investment for Marange remain on-going and that such
investments are critical to a sustainable and secure production environment
at Marange.

The Zimbabwe Revenue Authority ("ZIMRA") facilitates trade and collects
revenues, in the form of customs fees, taxes, and royalties. It also
functions as the importing authority, clearing parcels and checking for
documentation, including KP certificates on import. This agency communicates
with the export authority and confirms safe arrival of parcels.

ZIMRA provided the Team with schedules of imports in 2007-2009. In all but
one case, imports consist of Australian origin diamonds that come through
Belgian companies. Six different individuals and companies (Boart Longyear,
Jacob Bethel.

Corp., Lesley Faye Marsh Corp., Parmenta Investments, and Independence Gold
Mine) have imported diamonds. Both Boart Longyear and Jacob Bethel Corp.
received fines in 2007 for import-related violations.

The Reserve Bank of Zimbabwe ("RBZ") is the national bank, holding accounts
for government ministries only and acting as a technical advisor to the
government. In connection with exports, the RBZ issues a form (CD-1) by
which it authorises exports. This form is required, and contains specific
information about the export, including the beneficiary of the export, the
value of the export, what price is being charged, what revenue is being paid
to which government agency, any agent's commission, the terms of payment.
Multiple copies of the form are created, and sent to the client's local
commercial bank, to ZIMRA and to the exporter. A copy is also sent to
several responsible areas of the RBZ, for reporting and supervising
purposes. As indicated in the 2008 Annual Report, the Team was informed that
RBZ issuance of the CD1 became increasingly more difficult and
time-consuming in 2008, as a result, according to one interviewee, of RBZ
interest in taking on a greater role in the rough diamond trade.

The RBZ, however, is not authorised to buy and sell diamonds, and reportedly
has never done so. On one occasion, the RBZ was requested to store some
rough diamonds that had been acquired through a "swap" programme to clean up
illicitly mined diamonds. It was also requested to store diamonds that had
been seized from African Consolidated Resources, the company that held a
claim to Marange that was subsequently revoked.

After a period of time, all such diamonds were surrendered to the MMCZ - no
other diamonds have been stored at the RBZ since that time.

Although the representatives of the RBZ stated that they only hold accounts
for government ministry level agencies, and specifically denied holding an
account for the MMCZ or any other agency engaged in rough diamond trade,
representatives of the MMCZ stated that for a short period of three to four
months in 2008, the MMMD required them to move their bank accounts from a
commercial bank to the RBZ. After three or four months, the MMCZ was
required by the MMMD to move their accounts back to their commercial bank.

C. Summary of Internal Controls - Source to Point of First Export

1. Marange

The Team concludes that the system for internal controls does not
effectively capture all diamond production at Marange. As described below,
the Review Team has judged that certain entities within the Government of
Zimbabwe are directly involved with the removal of rough diamonds from the
Marange area. The discussion following in this section concerns only the
official ZMDC production that is captured through the legitimate channels
established by the ZMDC, MMCZ, and MMMD.

The Marange facility started officially producing diamonds in April 2007, at
which time it was declared a protected area, making unauthorised entry a
criminal offence, excluding entry by the local community. As described
above, the ZMDC has a Special Grant for the area, and the facility is
operated by a ZMDC subsidiary. A total of 150 people, including security
personnel, diggers, sorters, and 25 private security guards (employed by
Chitkem, a private security company), work at Marange.

ZMDC's Special Grant total area is 66 000 hectares. The road into the area
from Harare has at least five (5) policed road blocks where incoming cars
are halted by police and army representatives for inquiry. The team did not
observe any outgoing cars being stopped for inquiry. Within the 66 000
hectare property, there is a 10km2 area that is imperfectly fenced, i.e.
there are significant sections of the fencing that can easily be walked
through or are simply non-existent. These concerns with the fencing have
existed since formal production began in 2007.

Although this area is patrolled by the Zimbabwe Republic Police (ZRP) and
the Zimbabwe National Army (ZNA), there is no effective real control or
security in this area; indeed, as described in Section IV, these authorities
often are the cause of the insecurity. The larger, 66 000 hectare grant area
is also not secured or controlled in any manner.

The single Marange alluvial production area currently being worked is a 2.5
km2 area. It is fully fenced, and the perimeter is monitored by joint
ZRP-ZNA patrols. There is an elevated observation post (unmanned when the
Team visited). Persons entering and leaving the facility are searched by
employees. The production equipment used to process the collected gravel is
low tech - the production machinery is operating on fuel power (no
electricity or water source other than fuel driven generators and
transported water is available at the facility.) The diggings, the
production machinery and the sorting process are contiguous. The processed
"waste" is also stored on site very near to the production machinery -
further sorting of this soil is planned in the future.

Diamond sorters at Marange work within a smaller fenced area within the mine
and are closely supervised by employees of the private security firm. Once a
diamond is found by a sorter, it is handed to a security guard who places
into a "non-returnable" box (i.e., diamonds can go in but not out.) This box
is carried (in the company of security) to the sorting room. This room has
limited access, and is monitored by the security company employees. An entry
into a ledger is made for each diamond, noting carat weight. The production
is then placed into secure and sealed boxes on site, and then transported by
car (accompanied by the ZRP) to MMCZ offices in Harare, where the seals are
broken, the contents sorted and evaluated prior to export.

At this juncture, MMCZ undertakes to acquire all the necessary documentation
(including a KPCS certificate). Once payment is received, the documents are
produced and delivered to the MMCZ, which ultimately takes responsibility
for the documents, the export clearances and shipment of the parcel. The
MMCZ also receives confirmation from the recipient of the parcel that it has
arrived at its destination.

2. Murowa

This kimberlitic mining operation is owned by Murowa Diamonds Private
Limited, which is in turn majority-owned by Rio Tinto plc, a publicly traded
Australian mining company. Security within the mining area at Murowa
operates at a highly complete and technical level. Production from Murowa is
sealed in parcels on site and transported by security and Murowa employees
to Murowa headquarters offices in Harare. At this point, the MMCZ is invited
to the offices of Murowa for the purpose of engaging in the valuation and
export procedures. At no point do the diamonds ever leave the premises. The
required documents (KPCS certificate, invoice, packing list, bill of entry,
shippers instruction and release order and CD1) are then acquired by Murowa
from the MMCZ, joined with the diamonds and picked up by a Murowa contracted
South Africa security company for shipment to Antwerp by air. The security
company maintains physical custody of the documents and diamonds at all
times through the transport to the receiver in Antwerp.

3. River Ranch Limited

River Ranch Limited (RRL) is owned by Rani Investment, which is part of the
Aujan Group, a Middle Eastern manufacturing conglomerate. RRL is a Zimbabwe
registered mining company engaged in the extraction of diamonds, under the
authority of a Special Grant. The company operates a kimberlitic mine,
measuring some 16km2 in total, situated 22 kilometers from Beitbridge. RRL
also has an office in Harare.

Security at River Ranch is operating at a high level. There are mounted CCTV
cameras at strategic locations - and robust security measures, including
X-ray, used to enter and leave the processing plant facility. Production
from River Ranch has resulted in only five (5)11 exports since production
began in 2007. According to officials at River Ranch, this is due to a lack
of demand.

When a decision to export is made, the following procedures are applied: RRL
contacts MMCZ of their intention to export, and requests that
representatives of MMCZ travel to the mine for evaluation procedures. The
MMCZ evaluates labels and packs the diamonds in the presence of RRL at the
mine. RRL informs its buyers, who then contact MMCZ to complete the terms of
the sale. Once payment is made by the buyer, the MMCZ processes the export
permit, which is sent to the MMMD for approval. This document is sent to the
RBZ, which issues a CD-1. Once this form is acquired, a KPCS is issued by
the MMCZ. All documents are submitted to ZIMRA (Customs) for final
clearance. The documents are then sent back to the mine, and joined with the
parcel and shipped by one of RRL's privately engaged common carriers (G4S
International or Brinks Global), which makes all air cargo arrangements.
These details are forwarded to RRL.

When the representative of the carrier arrives at the mine to collect the
parcel, they have the documents, and their ID is checked, as is all
paperwork. Under heavy guard, the courier rep is escorted to the RRL
airstrip. The parcel is flown to Harare, accompanied by a representative of
RRL. They are met by security personnel, and escorted to a secured area of
the airport, where the parcel is loaded on to the traveling on aircraft, in
the presence of RRL, airport security and the courier. It is flown to
Johannesburg, held in secure courier company facilities there, and then
cleared by South Africa customs officials and the South African Diamond
Board for international shipment. Once the parcel arrives at its
destination, it is cleared and delivered by the courier company. When the
parcel leaves Zimbabwe, a confirmation is given to the MMCZ, and the issue a
copy of the KPCS to RRL. RRL's customer confirms receipt in writing.

D. MMCZ/ZMDC

The Team was able to review portions of the stockpile maintained by MMCZ and
ZMDC. Timing and logistical challenges prevented an exhaustive review of the
stockpile, and the Team recommends that a more thorough review of the entire
stockpile be conducted by the next KP team that visits Zimbabwe. The Team
was not able to review the portion of the stockpile maintained by the ZRP or
other judicial authorities for purposes of evidence and can provide no
comment as to the applicable security measures or quantity of rough diamonds
such authorities may possess.

The security system in place at the MMCZ/ZMDC offices features a number of
security cameras and locked safes inside designated areas of the building.
Personnel access is controlled by security guards and requires the presence
of designated personnel from the respective company that owns the stockpile.
Diamonds are maintained in individual parcels with corresponding
documentation included within the parcel.

E. Statistical Analysis

1. Production statistics

According to KP statistics, Zimbabwe has produced 695,016 carats in 2007 and
797,198 carats in 2008. They were valued at USD 31,400,904 and USD
43,825,425, respectively. Zimbabwean production comes mainly from Murowa and
Marange. The Murowa mine produced 147,956 carats in 2007 and 261,850 carats
in 2008. The remaining production comes from Marange and River Ranch mines,
amounting to 547,060 carats in 2007 and 536,068 carats in 2008, or 79% and
67% of the total production respectively.

Daily records of diamond production in Marange provided to the Team show
that during the period April - December 2007, 496,691 carats were produced.
In 2008, the total production was 460,017 carats, of which 73 % were
produced in the first half of the year. Production slowed in the last
quarter of the year, which corresponds to the period when there were reports
of an illegal diamond rush in Marange. The average production per month was
19,800 carats/month in the 4th quarter of 2008 whereas it was 58,000
carats/month in the 1st quarter of the same year.

Diamonds from Marange accounted for at least 71% of the total production in
2007 and 58% in 2008, compared to 21% and 33% for Murowa in 2007 and 2008,
respectively. The share of value for Marange diamonds in total national
production is not easy to establish since the characteristics of diamonds on
the three sites may differ. Export records from Murowa in 2008 indicate an
average price of 114 USD/carat, whereas the average price calculated from
the KP statistics is 111 USD/carat. Thus, the share of Marange production in
terms of value should be similar to the one in terms of weight.

2. Export statistics

Zimbabwe exports its entire production, as there is no operational cutting
centre in the country. The imports (which are actually re-imports) represent
a tiny proportion, less than 1% of the trade volume. Only exports are
therefore analysed in this report.

In 2007, Zimbabwe declared exports of 489,171 carats to the European
Community (68%), South Africa (17%), the United Arab Emirates (13%) and
China (1%). In terms of value, this corresponds to a total of USD 23 377 870
that breaks down as follows: the European Community (74%), South Africa
(3%), the United Arab Emirates (14%) and China (9%).

In 2008, Zimbabwe declared exports of 327,833 carats to the European
Community (67%) and to the United Arab Emirates (33%). In terms of value,
this corresponds to a total of USD 26,693,385, which breaks down as follows:
the European Community (93%) and the United Arab Emirates (7%).

Exports to the European Community in 2008 corresponded exactly to exports
declared by Rio Tinto, which operates the Murowa mine, i.e. 218,284 carats,
representing 67% of total Zimbabwean exports. It can be assumed that the
diamonds exported to the UAE were produced in Marange or River Ranch. In
2007, exports from Murowa accounted for 44% of the total Zimbabwean exports
to the EC. The proportion of diamonds from Marange in the official exports
has diminished between 2007 and 2008, and those diamonds were exported to
various destinations.

KP statistics indicate discrepancies with two trading partners: the European
Community in 2007 and 2008, and the United Arab Emirates (UAE) in 2008. The
MMMD indicated that it had begun reconciliation processes with both the EC
and UAE but had not had the opportunity to complete the processes prior to
the time of the Review Mission.

A comparison of declared exports and production figures shows a gap of
205,845 carats (30% of the total production) in 2007, and 470,084 carats
(59% of the total production) in 2008. Part of the discrepancy between
production and exports figures is a result of the fact that police seizures
were included in production, but not exported because they were used as
court exhibits. The data given to the Team shows that the police seized a
total of 145,510 carats in 2006, 25,655 carats in 2007, 22,945 carats in
2008, and 21,582 carats through June of 2009. With the exception of a single
year (2006), the seizures represent only a small fraction of the total
production and cannot explain the discrepancy between production and
exports.

Finally, MMCZ statistics for 2009 indicate that Zimbabwe is exporting
significantly greater quantities of rough diamonds than in previous years.
In the first half of 2009, MMCZ records indicate that Zimbabwe exported
700,714 carats, already more than double the total from all of 2008, and
over 210,000 carats more than in all of 2007.

MMCZ explained that this was largely a result of a decision to sell off
portions of the stockpile in order to improve cash reserves.

III. SPECIFIC CONCERNS AND FINDINGS ABOUT MARANGE

As indicated above, the primary concern leading to the establishment of the
Review Mission was the situation in and around the Marange diamond field in
Manicaland in eastern Zimbabwe. Marange was also a significant focus of the
2007 RV report, as an earlier diamond rush at Marange in 2006 prompted the
establishment of the RV team. The Marange field and surrounding area are
described in detail in the 2007 RV report, and there has been no change in
the legal status or other characteristics of the field since that report.

The 2007 RV report concluded that, following a "mop-up" rough diamond
purchasing operation, transfer of Special Grant claims to the ZMDC enabling
the ZMDC to begin formalised production, and other security measures, the
"Government of Zimbabwe has in general managed to bring [the Marange]
situation under control in the first half of 2007." The 2007 RV report
included a recommendation that the Government of Zimbabwe continue with its
efforts to increase and maintain control at Marange.

In response to this recommendation, Zimbabwe's annual reports in 2007 and
2008 provided identical updates on the status of implementation:
"Implementation is ongoing; Security plan is being reviewed - security
fencing and accountability system is being upgraded." The 2008 Annual Report
also included a reference to "occasional vandalism of security fencing by
illegal diamond diggers" with no direct indication as to how that had
impacted its implementation of the recommendation.

In a separate section of its Annual Report, Zimbabwe indicated the
following:

Illegal diamond diggers and dealers paused security and accountability
challenges at Marange. Occasionally, the illegal diggers pilfered diamonds
from the diamond concessions where Zimbabwe Mining Development Corporation
has exclusive prospecting and mining rights.

The country's security agents endeavoured to stop the illegal activities
within the diamond field, which besides illegal diamond digging and dealing,
included murder among the diggers and dealers, robberies, rape, cattle
rustling etc.

In the 4th quarter of 2008 the security agents executed a special operation,
which is still ongoing. The objective of the special operation was to
restore order and maintain order. The operation flushed out about 30 000
illegal diamond diggers from the diamond field. There were three (3)
reported deaths from among the illegal diggers and dealers, which resulted
in eight (8) deaths [sic - should be arrests/prosecutions].

In conducting its work, the Team visited the area in and around the Marange
diamond fields, conducted extensive interviews with the victims of the
reported violence in the fall of 2008. In addition to meetings with
Zimbabwean authorities, the Team held meetings with the Mayor of Mutare, the
former Deputy Mayor of Mutare, the administrative staff of the Mutare
Provincial Hospital, the Member of Parliament for Mutare Central, the Member
of Parliament for Mutare West, the Chiadzwa Chieftain, the manager of
Chiadzwa's medical clinic as well as the civil society organisation, Centre
for Research and Development.

During the field visit, the interviews, and the meetings, the Team collected
evidence that contradicted the accounts given by the Zimbabwean authorities
in the Annual Report section above and in separate interviews with the Team
on the involvement of the security forces in illegal mining activities and
on the reported violence in and around the Marange diamond fields.

The Team was told by a number of interviewees, including the ZRP, ZNA, ZMDC,
MMCZ, and others that, starting in approximately October 2008, the ZRP faced
a critical situation resulting from the renewed appearance of an estimated
tens of thousands of illegal diamond miners. Earlier police operations,
which included mass arrests, had failed to stem mining activities by illegal
miners.

The ZRP told the Team that it requested assistance from the ZNA in October
2008 in response to an increased presence of approximately 35,000 illegal
miners in the Marange diamond fields. The Team was told that that the ZRP
remained in charge of all 24

operations in Marange at all times, with total forces of approximately 1,500
police officers and military personnel under its command. Both the ZRP and
the ZNA told the team that no shots were fired during the efforts to
disperse the illegal miners, that the illegal miners faced no direct
violence, and that no police or army personnel experienced any injuries.

The Team was also informed that the ZRP and the ZNA continue to provide
joint security in the area, under the authority of the ZRP, and that there
is no formal involvement of any nature by the approximately 900 officers
from both forces in diamond mining or trading activities. The ZRP and ZNA
provided information on individual instances of misconduct by soldiers and
officers, which resulted in deaths in 5 cases, but which were claimed to be
unrelated to rough diamond activity.

During its visit to the Marange area, members of the Team observed soldiers
with uniforms using civilians to conduct illegal diamond-mining activities.
Members of the Team observed three ZNA personnel overseeing the washing of
diamond gravel by illegal diamond miners. On two occasions, when members of
the Team tried to approach them, the military personnel and the illegal
miners disappeared into nearby bushes. On one occasion, members of the Team
spoke to a group of eight illegal miners, including women with small
children, who had stayed behind; however, this group was not forthcoming.

In addition to observing diamond-washing activities, members of the Team saw
several groups of illegal diamond miners, some digging diamonds, and some
carrying sacks of gravel. These activities took place outside the perimeter
of ZMDC's current mining area, but still within the Special Grant area of
66,000 hectares. The Team also observed the ZMDC truck removing water from
the facilities of the Chiadzwa medical clinic (Water is often used by
diamond mining companies for pumps and as a means to sort through gravel to
identify diamonds. ZMDC's mining techniques are quite basic, and water is
used by ZMDC for these purposes.)

The Team was able to speak to a group of seven illegal miners who initially
started running when a vehicle used by the Team approached them. All of the
individuals were carrying sacks containing diamond gravel, some of which
they left behind while running away.

After explaining to them the Team's interest in contributing to the
improvement of the situation in and around Marange and providing assurances
that their identity would not be shared with the security forces, the
illegal diamond miners returned and shared their experiences. This group
told the Team that they are regularly engaged by military personnel who
allow them to collect gravel from the area that the ZMDC is currently
mining. The group mentioned that the military officers they work for usually
allow them to take 10% of the proceeds from the diamonds they recover. They
also told the Team that the military forcibly uses them to refill the land
where diamonds have been extracted without providing them any compensation.

These reports correspond to other evidence presented to the Team, and the
Team judges as credible the proposition that the system of ZNA/ZRP
syndicates operating to smuggle rough diamonds has been in place since
approximately November 2008, and likely since formal production began at
Marange in 2007. The Team concludes that the Government of Zimbabwe
authorities are aware of these syndicates and on-going smuggling operations
and have permitted them to continue.

The Team received consistent reports that diamonds removed from Marange in
this manner generally exit Zimbabwe through the nearby border with
Mozambique, where significant illicit buying and trading operations are
underway. The Team received reports from one organisation subsequent to the
Review Mission indicating that buyers from Lebanon, Israel, Belgium, and
Dubai are present in the Mozambican towns of Manica and Chimoio. In general,
the reports indicate that rough diamonds travel from Mozambique directly -
and illegally - to cutting and polishing factories, likely without obtaining
KPCs along the way.

Members of the Team asked the aforementioned group of seven illegal miners
about deaths and violence during the October 2008 - January 2009 operations
to evict illegal miners from the Marange diamond fields. Each one of these
illegal miners reported seeing people killed and the numbers they cited
ranged from one to seven.

This group also told members of the Team that they observed extreme violence
against illegal miners and that the ZRP and ZNA used two helicopters, "AK"
rifles, dogs, horses, shotgun pellets, batons, and tear gas. The Team found
that the equipment listed by this group largely corresponded with the ZRP
and ZNA's own accounts of equipment present during their operations.

Including the individuals indicated above, the Team interviewed more than 20
victims in Mutare and Chiadzwa. The victims included women who reported
that, while under the custody of the security forces, they were raped
repeatedly by military officers and that they have been forced to engage in
sex with illegal diamond miners. One victim told the Team that she tested
HIV positive after she had been forced to have sex with two men and then
raped by a military officer.

During the interviews of victims, the Team heard accounts of beatings of men
and women by the security forces, and saw wounds and scars from dog-bites
and batons.

A substantial number of the victims and witnesses interviewed by the Team
reported a rampant use of violent dogs by the Zimbabwean security forces.
The team found that the medical clinic in Chiadzwa village treated many of
the victims of the violence in Marange. Some of the victims, including petty
traders, reported that they were denied access to medical facilities in
Mutare by the government. The Team also received documentation from the
Mutare Clinic documenting individual cases treated there, a significant
number of which included assaults, dog bites, and gunshot wounds sustained
during October and November 2008. The Zimbabwean Physicians for Human Rights
told the Team that it assisted four cases of people who were denied medical
treatment.

The Team asked the ZMDC and the MMCZ if they received reports of violence
perpetrated against citizens by either the ZRP or the ZNA from October 2008
through January 2009. Both the ZMDC and the MMCZ maintained that they did
not receive

reports of any acts of violence. However, the Team interviewed a witness who
stated that he himself had met with the ZMDC and provided specific
information about these events at that time. Further, the Mayor of Mutare
and the Member of Parliament for Mutare West reported the increase of
violence and illegal activities in the area to the authorities during this
time period.

The Team assesses as credible the general details set forth in the reports
gathered from victims and through other meetings. The Team does not view as
credible the general details provided by the ZRP, ZNA, and other authorities
concerning the conduct of security operations in October-December 2008, and
in the period since January 2009.

The Team judges that an on-going operation is in place through which illegal
mining and smuggling of rough diamonds from the Marange area is coordinated
and conducted by the ZNA and was previously coordinated by the ZRP. The Team
assesses that, at a minimum, the ZMDC is aware of and may also participate
in some aspects of this operation. The Team judges as likely that the MMCZ
and MMMD are aware of the operation.

Prior to the departure of the Team from Harare, the Minister of Mines, the
Honourable Obert Mpofu, announced that Zimbabwe would demilitarise the area
and that the military would be withdrawn in phases. The Minister invited the
Kimberley Process to observe the demilitarisation process. According to
information provided to the Team following the visit, as well as numerous
media reports, however, this does not appear to have occurred; indeed, the
Team is aware of reports that the military presence in the area may actually
have increased.

IV. THE  KP CERTIFICATE

Section II of the KP Document provides that each Participant should ensure
that:

(a) a Kimberley Process Certificate (hereafter referred to as the
Certificate) accompanies each shipment of rough diamonds on export;

(b) its processes for issuing Certificates meet the minimum standards of the
Kimberley Process as set out in Section IV;

(c) Certificates meet the minimum requirements set out in Annex I. As long
as these requirements are met, Participants may at their discretion
establish additional characteristics for their own Certificates, for example
their form, additional data or security elements;

(d) it notifies all other Participants through the Chair of the features of
its Certificate as specified in Annex I, for purposes of validation.

The Review Team notes concern with subsection (a), finding Zimbabwe
generally compliant with subsections (b), (c), and (d). The Team notes one
area of concern with respect to subsection (c), further described below.

First, concerning subsection (a), the Review Team notes that, in general,
the process for issuance of KPCs remains the same as set forth in the 2007
RV report, as elaborated upon above. In general, the Review Team judges that
this process, though remaining procedurally cumbersome, is, in and of
itself, sufficient to meet KP minimum standards.

However, the process, at least vis-à-vis Marange, is not implemented in a
manner sufficient to ensure that the requirement of subsection (a) is
fulfilled. Specifically, as explained above and in the 2007 RV report, the
process for issuance of KPCs for export requires interaction by an exporter
with the MMCZ, MMMD, and RBZ prior to the granting of a KPC by MMCZ.
Information gathered by the Review Team indicates that this does not occur
consistently on the ground at Marange, as certain government authorities
enable rough diamonds to leave the Marange area without going through the
required processes. Specifically, the weak security measures in place within
both the formal production area and larger Special Grant territory at
Marange, in conjunction with the consistent, on-going level of facilitated
smuggling, results in the failure of Zimbabwe to ensure that each shipment
of rough diamonds from Zimbabwe will have a KPC.

Although normally considered more of a matter of internal controls, the
Review Team also judges failure to ensure the issuance of a KPC for each
export of rough diamonds to be a concern with respect to Section II (a).
During its visit to Marange, the Team witnessed a sale of rough diamonds by
illegal miners to an unlicensed buyer. That this incident could be witnessed
openly by the Team underscores the extent of the problem and explains why
reference is made to concerns about compliance with Section II(a).

Second, with respect to subsection (c), the Review Team notes that, as
indicated in the 2004 RV and 2007 RV reports, the Zimbabwe KP Certificates
continue to reflect an error in HTS classification number, i.e. 7102.20 vice
7102.21. The 2004 RV report recommended that a manual change of the HTS
number be made on each KPC until the original stock is exhausted; the 2007
RV report indicated that this recommendation had been adopted and
implemented.

However, based on the Team's review of copies of 43 of the final KPCs issued
by Zimbabwe from 1 January 2007- 24 June 2009, it appears this change was
made on only five, primarily on KPCs issued in 2009. Notwithstanding the
question this raises with respect to the finding in the 2007 RV Report,
particularly in light of the counterfeit Guinean KPCs identified in 2009, at
least some of which featured an analogous error in HTS classification
number, the Review Team reiterates the recommendation of the 2004 RV report
that this change be made manually on each KPC issued by Zimbabwe until the
printed stock is exhausted.

V. UNDERTAKINGS IN RESPECT OF THE INTERNATIONAL TRADE IN ROUGH DIAMONDS

Section III of the KP document sets forth:

(a) with regard to shipments of rough diamonds exported to a Participant,
require that each such shipment is accompanied by a duly validated
Certificate;

(b) with regard to shipments of rough diamonds imported from a Participant:

. require a duly validated Certificate;

. ensure that confirmation of receipt is sent expeditiously to the relevant
Exporting Authority. The confirmation should as a minimum refer to the
Certificate number, the number of parcels, the carat weight and the details
of the importer and exporter;

. require that the original of the Certificate be readily accessible for a
period of no less than three years;

(c) ensure that no shipment of rough diamonds is imported from or exported
to a non- Participant;

(d) recognise that Participants through whose territory shipments transit
are not required to meet the requirement of paragraphs (a) and (b) above,
and of Section II (a) provided that the designated authorities of the
Participant through whose territory a shipment passes, ensure that the
shipment leaves its territory in an identical state as it entered its
territory (i.e. unopened and not tampered with).

In general, Zimbabwe appears compliant with the provisions of Section III.

However, the Review Team notes some concern with respect to a possible
interpretation of subsection (c). As indicated above, credible information
gathered by the Team indicates that a substantial quantity of rough diamonds
smuggled away from Marange exit Zimbabwe to Mozambique, a KP
non-Participant. This has been a known issue for the Government of Zimbabwe
since at least 2007, when the 2007 RV report indicated that illegal dealers
had established themselves in Mutare, "a few kilometers from the border with
Mozambique." The Review Team was not presented with any information by the
Government of Zimbabwe concerning specific efforts to prevent the continuous
exit of diamonds from Zimbabwe to Mozambique.

Given the length of time that this appears to have been occurring, and the
potential quantities of rough diamonds exiting Zimbabwe to Mozambique, the
Team notes that subsection (c) may require further elaboration from the KP
as to the applicability to a situation like that of Zimbabwe.

VI. INTERNAL CONTROLS

Section IV of the KP document sets forth:

(a) establish a system of internal controls designed to eliminate the
presence of conflict diamonds from shipments of rough diamonds imported into
and exported from its territory;

(b) designate an Importing and an Exporting Authority(ies);

(c) ensure that rough diamonds are imported and exported in tamper resistant
containers;

(d) as required, amend or enact appropriate laws or regulations to implement
and enforce the Certification Scheme and to maintain dissuasive and
proportional penalties for transgressions;

(e) collect and maintain relevant official production, import and export
data, and collate and exchange such data in accordance with the provisions
of Section VI;

(f) when establishing a system of internal controls, take into account,
where appropriate, the further options and recommendations for internal
controls as elaborated in Annex II.

Principles of Industry Self-Regulation

Participants understand that a voluntary system of industry self-regulation,
as referred to in the Preamble of this Document, will provide for a system
of warranties underpinned through verification by independent auditors of
individual companies and supported by internal penalties set by industry,
which will help to facilitate the full traceability of rough diamond
transactions by government authorities.

The Review Team notes concerns with subsections (a), (d), and (f).

With respect to subsection (a), the Team concludes that Zimbabwe's system of
internal controls, particularly at Marange, does not necessarily eliminate
the presence of conflict diamonds from diamonds exported from its territory.
The Team views as a necessary precondition to fulfill this provision a
system that controls rough diamonds from the point of production to the
point of export. While illicit mining and smuggling can rarely, if ever, be
fully eliminated, the Team views as distinct a situation where a Participant
faces individualised cases of illegal smuggling, and that of Zimbabwe, where
the smuggling and operation that enables rough diamonds to flow from
Zimbabwe outside the KPCS is largely operated and maintained by official
entities.

The involvement of government entities in these flows, rather than solely
the usual black market actors, should result in direct implication of the
overall system of internal controls that Zimbabwe is responsible for. That
is, the Team judges that the smuggling operation out of Marange should be
deemed to be "on the account of" Zimbabwe itself. As a result, the Team
assesses that the flaws in Zimbabwe's system of internal controls makes
possible the introduction of conflict diamonds into the legitimate trade
because it maintains an on-going level of smuggling that does not provide
for imposition of the required elements of the KPCS or a mechanism to
control particular rough diamonds from point of production to point of
export. Without such elements, a system cannot be deemed to be "designed to
eliminate the presence of conflict diamonds . . . "

While there are currently no indications that this is the case, an
established smuggling channel as exists from Marange could easily be viewed
as a feasible mechanism for a trafficker of conflict diamonds. And because
the system of internal controls established for Marange only applies to a
portion of the production, such conflict diamonds could easily be introduced
and further smuggled by this system without detection or control.

The Team observed a significant level of basic lawlessness in and around
Marange, which, according to numerous reports provided to the Team that were
deemed to be credible, carries over to the neighboring areas of Mozambique,
from whence rough diamonds are reportedly smuggled onward into the
territories of a number of Participants.

As a result, illicit rough diamonds appear to be able to flow in and out of
the Marange area with little impediment. Lawlessness, particularly when
combined with violence and largely overseen by government entities, should
not be the hallmark of any system of internal controls deemed to be
compliant with the provisions of subsection (a).

Further, the general situation in and around Marange not only prevents
Zimbabwe from insuring that rough diamonds are not introduced into the trade
through its territory, but the level of smuggling out of Marange also
jeopardizes the ability of other Participants to be sure that their own
system of internal controls is sufficient.

The Team judges that the relatively minimal security measures in place at
the official mining operations at Marange also do not eliminate the
potential for introduction of conflict diamonds into the system, as required
by subsection (a) and as set forth in Paragraph 10 of Annex II of the KP
document (referred to by subsection IV(f)). The Team determined and
demonstrated that it was quite simple to breach the fence - where the fence
exists - surrounding the mining operation at Marange. Moreover, the lack of
coverage of security cameras and manner in which the sorters process diamond
production makes it quite possible for conflict diamonds to be mixed in with
the general Marange production. Neither ZMDC nor MMCZ appear to have a
system in place to evaluate the origin of the diamonds contained in Marange
production.

With respect to subsection (d), the Team notes with concern the manner in
which the ZNA and ZRP have undertaken security operations to deal with
transgressions of the Precious Stones Trade Act and other relevant laws. As
set forth in extensive detail in the 2007 Annual Report, Zimbabwean law
provides for appropriate and dissuasive penalties; indeed, the laws were
enhanced following the first rush on Marange. The Team judges that the use
of extreme violence to counteract illegal mining does not correspond to the
principle set forth in this minimum requirement. Although the KP does not
instruct, nor does the Team intend to provide such instruction to, Zimbabwe
or any other Participant as to how to implement sovereign decisions to
undertake security operations, the Team concludes that the manner in which
the security operations were conducted contradict the nature of this
provision of the KP document.

The Team fully appreciates the challenges facing the Government of Zimbabwe
in administering the Marange mine, as well as with respect to the larger
economic and political issues facing the country. Nevertheless, the
Government authorities must rely on the very laws they have set forth to
combat illegal mining. Although they clearly do so to some extent, in light
of the number of arrests in the past year, there is a concern that the
authorities do not solely rely on these penalties, but also implement
extrajudicial actions that the Team views as representing a concern with
respect to subsection (d).

VII. COOPERATION AND TRANSPARENCY

Section V of the KP sets forth:

(a) provide to each other through the Chair information identifying their
designated authorities or bodies responsible for implementing the provisions
of this Certification Scheme. Each Participant should provide to other
Participants through the Chair information, preferably in electronic format,
on its relevant laws, regulations, rules, procedures and practices, and
update that information as required. This should include a synopsis in
English of the essential content of this information;

(b) compile and make available to all other Participants through the Chair
statistical data in line with the principles set out in Annex III;

(c) exchange on a regular basis experiences and other relevant information,
including on self-assessment, in order to arrive at the best practice in
given circumstances;

(d) consider favourably requests from other Participants for assistance to
improve the functioning of the Certification Scheme within their
territories;

(e) inform another Participant through the Chair if it considers that the
laws, regulations, rules, procedures or practices of that other Participant
do not ensure the absence of conflict diamonds in the exports of that other
Participant;

(f) cooperate with other Participants to attempt to resolve problems which
may arise from unintentional circumstances and which could lead to
non-fulfilment of the minimum requirements for the issuance or acceptance of
the Certificates, and inform all other Participants of the essence of the
problems encountered and of solutions found;

(g) encourage, through their relevant authorities, closer co-operation
between law enforcement agencies and between customs agencies of
Participants.

The Review Team assesses that Zimbabwe is generally compliant with
subsections (b)-(f). However, the Team believes that information provided by
Zimbabwe in response to the KP Chair's queries in February 2009 and in its
Annual Report for 2008 (submitted in March 2009), as well as in reports and
information presented to the Team itself during the Review Mission, was
false, and likely intentionally so. Although perhaps more squarely an issue
with respect to compliance with the ADPR, the Team notes its concern in this
regard vis-à-vis subsection V(a).

As indicated above, the Team assesses as credible the information provided
by witnesses and in the report prepared by Zimbabwean civil society
concerning the intense period of violence of October-December 2008 connected
with Operation Hakudzokwi, as well as the on-going nature of ZNA/ZRP
facilitation of on-going illegal smuggling operations. The Team witnessed
ZNA soldiers overseeing illegal diamond operations, observed an illegal sale
of rough diamonds from members of a "syndicate," and interviewed numerous
witnesses who described being the victims of extreme violence in connection
with the illegal mining and smuggling of diamonds. The Team also received
consistent reports from regional government officials that corroborated
these accounts.

In each of its presentations to the KP, whether to the Chair, WGM, or Review
Team, the Government of Zimbabwe has categorically denied the use of any
violent measures against illegal miners or the involvement of ZNA, ZRP, or
other entities in illegal diamond mining and smuggling operations. The Team
does not consider these denials to have been made in good faith and views
with concern the notion that a Participant would provide false information
to the Chair, WGM, and other Participants.

Zimbabwe has had a significant period of time during which to provide the
necessary updates on its practices, particularly when a request for such
information was posed directly by the KP Chair, upon recommendation of the
WGM.

Although the information identified by the Review Team may not have been
particularly welcome reports for Zimbabwe to make to the KP, it is the Team's
view that only through such open and transparent cooperation can the KP be
successful in achieving its Mandate.

Finally, while it may not fit squarely within this section, the Team also
expresses concern with respect to the treatment of at least one of the
individuals with whom the Team worked during its time in Zimbabwe. Newman
Chiadzwa did meet with members of the Team and provided extensive access to
the Chiadzwa area. In late July 2009, in apparent contravention of the
commitments made by Zimbabwe to the KP Chair, Review Team, and entire
Intersessional, actions have been taken against Newman Chiadzwa, including
forced removal from his home and seizure of property.

The Team is aware of on-going legal matters against Newman Chiadzwa, dating
from 2007, including some actions related to illegal diamond activities.
Certainly, to the extent Zimbabwe is undertaking action through the normal
legal processes vis-à-vis Newman Chiadzwa, the Team has no specific comment.
However, the Team would like to receive confirmation of this from the
Government and ensure that a body of the KP, such as the WGM, rather than
the Review Team, remains seized with this matter.

VIII. CONCLUSIONS AND RECOMMENDATIONS

As indicated above, although some aspects of the Zimbabwean system of
internal controls and KP compliance do appear to function without concern,
the Team has identified several areas in which it finds Zimbabwe
non-compliant with the minimum requirements of the KPCS. In addition to the
numerous recommendations presented below, the Team echoes the findings of a
previous KP Review Mission to another Participant:

The review mission is mindful of the implications of the findings for both
the integrity of the KPCS as well as for Zimbabwe. Clearly, the current
state of affairs in [Zimbabwe], in terms of the level of compliance with the
KPCS, cannot be allowed to continue. When a Participant fails to fulfill the
obligations it has committed itself to and satisfactorily adhere to the
minimum requirements for compliance, the objectives of the KPCS are
undermined.

Urgent corrective action is required if the integrity and effectiveness of
the KPCS are to be preserved . . .

Thus, the Team believes that these matters should be reviewed as a matter of
urgency by the WGM and Participation Committee for necessary action, with
respect to individual issues and overall action with respect to the status
of Zimbabwe. The Team remains prepared to assist with whatever actions the
KP or its subsidiary bodies deem necessary.

Although this report has focused almost exclusively on Zimbabwe, the Team
believes it critical that coordinated action be taken by other KP
Participants in the region - particularly South Africa, Namibia, and
Botswana - to act against smuggling.

Moreover, these Participants boast many best practices and other aspects of
their KP compliance systems that Zimbabwe could benefit from understanding
and implementing.

For example, the Karas Region in Namibia (Namibia's diamond producing
region) and Northern Western Province in South Africa, jointly collaborate
on matters related to illicit diamond trade and share information on a
regular basis. This has been a "resultsbased" system of co-operation, and
illicit diamond trade has been rooted out. Namibia and South Africa still
conduct joint operations along their common borders.

Further, the Team urges KP Participants from outside the region whose
nationals have been connected to illicit buying and smuggling - the European
Community (Belgium), Israel, Lebanon, and the United Arab Emirates -
continue to practice "enhanced vigilance," as previously recommended by the
WGM, and focus more resources on preventing the entry of illicit Marange
diamonds into their territories. If necessary, these Participants should
undertake diplomatic outreach to Mozambique to pursue the exchange of law
enforcement information that Mozambique may have on the illicit operations
underway in its territory.

As set forth in the Mandate, the Team has developed a number of
recommendations for further action, addressed to Zimbabwe and to other
entities within the KP, as follows:

Government of Zimbabwe:

1. Acknowledgement of non-compliance with KP minimum standards. Voluntary
self-suspension from rough diamond trading until KP determines that minimum
standards have been met. The Team notes that the Government of Zimbabwe has
positively addressed the first part of this recommendation in its July 14
response but did not discuss voluntary self-suspension.

2. Development of a workplan, in coordination with KPCS, to provide for
improved internal controls throughout KPCS compliance system and, in
particular, a sustainable and secure production environment at Marange, in
line with KP minimum standards. The development and implementation of this
workplan should be undertaken with the involvement of domestic industry and
civil society, consistent with the tri-partite nature of the KPCS.

The Team notes a positive response by the Government of Zimbabwe in its July
14 response to the concepts described in this recommendation but is not
aware of further action in this regard.

3. Because of the Team's findings that the presence of ZNA soldiers both
participate in illicit diamond trading activities and actually contribute to
the general situation of lawlessness in and around Marange, the Government
of Zimbabwe should follow-up on its commitment to withdraw military
personnel from the area in and around Marange, including Chiadzwa village.

4. Resolution, in accordance with Zimbabwean law, of outstanding ownership
disputes and land claims in and around Marange. The local community in
Marange area should be formally represented/involved in any decision-making
processes regarding future use of the area, including relocation and
beneficiation.

a. In conjunction with the claims resolution, an education/awareness
campaigns is needed to educate local residents about the negative impact
that illicit diamond trade can have on the economy. Local residents in and
around Marange should be encouraged to resist smuggling and preserve
diamonds for local development opportunities, as has largely been the case
at Murowa, for example.

5. Immediate implementation of enhanced security measures at Marange and the
MMCZ complex.

a. Construction of the fencing around Marange must be completed, and all
areas where the fence can be penetrated must be mended. The plan developed
by the ZRP for the necessary fencing and equipment measures should be
reviewed carefully and implemented, to the extent possible.

b. A more detailed profile system must be introduced in order to prevent
suspected illicit diamond traders from entering the diamond areas or from
being employed in any diamond mine.

c. At Marange, employees sort diamonds with safety gloves. When Diamonds are
manually-sorted, tweezers should be used to pick up the diamonds and
scrapers to shift or separate gravel, rather than by bare hands or with
safety gloves. Diamond sorters should also not wear long boots.

d. Diamonds at Marange are sorted under an open shade, and one can see the
diamond box from a distance. This is a security risk. The sorting area must
be sealed off. A diamond register must be introduced where diamonds are
sorted, so that the contents of the box may be recorded before it is taken
elsewhere. There must be access control into recovery and only authorized
persons must enter the recovery. There must be only one single entry point.

e. Method of diamond sorting at Marange is very outdated. There is a
possibility that only 60-70% of diamonds are retrieved. There is a need to
control access to tailings as they still contain a lot of diamonds.

f. The security officials at Marange observe the sorting of diamonds but
appear to be absent when the diamonds are counted and weighed in. Security
officials on site must have clear job descriptions. There do not appear to
be specific tailings, gravel, or sorting handling procedures.

g. The Government of Zimbabwe should ensure that any efforts to increase
security in and around Marange are carried out in a manner that respects
human rights and does not contribute to further smuggling.

h. Once the proper systems are in place at Marange, Zimbabwe may consider
development of a well-trained Diamond Detective Branch (undercover agency,
similar to one in Namibia and South Africa) to vigorously deal with the
illicit diamond trade at Mutare and other border areas. The branch must
share information with neighboring states and collaborate in obtaining full
information on particular suspects and networks.

6. Study ways to improve recording and quantification of illegal trade in
diamonds, i.e. distinguish foreign nationals in the police seizures
database.

7. Provision of a full assessment of the total unsold production in order to
reconcile production, stockpile, and exports. This must include diamonds
subject to judicial process, which the Team was not able to review.

8. Ensure that necessary manual changes to the HTS classification error on
pre-printed KPCs are made consistently.

9. As recommended in the 2007 RV report, consideration by the Government of
Zimbabwe of revising the current KP compliance structure to create a
simplified process that reduces the number of actors involved in the import
and export processes.

a. Given the particular needs demanded by the KP, Zimbabwe may consider
removing production and administration of diamonds from the MMCZ and ZMDC
and instead develop an entirely separate diamond office.

10. Review of previous submissions to the KP concerning Marange for possible
revision.

11. Presentation to the KP of relevant information concerning the actions
taken against Newman Chiadzwa, as well as a renewed commitment to refrain
from retaliation against Newman Chiadzwa or any other individuals with whom
the Review Team met.

12. Consideration of the appointment of a special rapporteur or other
appropriate mechanism to further document the human rights concerns and
violence at Marange. The Team notes a positive response by the Government of
Zimbabwe in its July 14 response to this concept.

a. Competent authorities should institute an investigation that will further
look into the issue of violence against civilian populations emerging from
the operations in Marange.

b. The KP Chair should contact the Office of the United Nations High
Commissioner for Human Rights and provide a summary of the findings of this
report, as well as summaries of interviews/photographic evidence.

c. As stated above, the Government of Zimbabwe should ensure that any
efforts to increase security in and around Marange are carried out in a
manner that respects human rights and does not contribute to further
smuggling.

Kimberley Process/Working Groups/WDC:

13. In light of Zimbabwe's non-compliance with the minimum requirements, the
Participation Committee should consider the full range of options set forth
in the Interim Measures Guidelines, including suspension of Zimbabwe for a
period of at least six months, or until such time as a KP team determines
that minimum requirements have been met. If Zimbabwe opts to self-suspend,
as suggested by Recommendation #1, then the KP should undertake the
necessary processes to implement the selfsuspension.

14. Facilitation by the KP of the appointment of an independent monitor to
assist with the implementation of the workplan for Marange and overall
Zimbabwean KP compliance system. The monitor would assist in the
coordination of the request and receipt of technical assistance and support
through the KPCS and its Participants and Observers (see #5).

15. Facilitation by the KP of the provision of technical and other
assistance, e.g. security cameras, fencing, and other measures set forth in
Recommendation #5, during which time the Government of Zimbabwe implements,
as part of its workplan, a security program that excludes the ZNA, and to
the fullest extent possible, the ZRP from responsibilities in and around
Marange.

16. Creation of a Regional Task Force, with a structure consistent with the
tripartite nature of the KPCS, to provide an on-going mechanism for
oversight of the independent monitor, provision of technical assistance,
information sharing, and other coordination efforts throughout the region.

The Task Force could work directly in conjunction with the independent
monitor, or as a mechanism within the KP (e.g., initiative of the KP Chair).

17. Review by WGS of 2009 statistics from the DRC and other regional diamond
producing Participants, as well as the EU, UAE, India, Israel, and Lebanon
to determine if illicit Marange diamonds have entered the legitimate trade.

18. Development by the WGM of additional measures for "enhanced vigilance"
by all KP Participants to ensure that illicit Marange diamonds do not enter
legitimate trade. Participants whose nationals have been implicated in the
smuggling of Marange diamonds should investigate these claims further and
provide detailed results to the WGM.

19. Expedited review and consideration of the revised proposal concerning
the provision and administration of security in diamond mining areas.

20. Outreach by the KP and individual Participants, as appropriate, to
encourage Mozambique to improve border control and consider joining the KP
as a means to combat smuggling efforts.

21. The WDC should work with MMCZ to ensure full compliance with and
implementation of the System of Warranties. - ZimOnline