Diamond marketer plans exit

Source: Diamond marketer plans exit | The Sunday Mail July 24, 2016

Kuda Bwititi Chief Reporter
FIRST Element, the company that has been solely marketing Zimbabwe’s diamonds since 2014, says it will leave the country next year and hand over operations to locals following suspicions that it could be complicit in suspected undervaluing of Marange diamonds. The company has been under the spotlight and only last week, Minerals Marketing Corporation of Zimbabwe (MMCZ) deputy general manager, Mr Richard Chingodza, told the Parliamentary Portfolio committee on Mines and Energy that the firm was behind losses from diamond proceeds.

Recently, Finance and Economic Minister Patrick Chinamasa identified undervaluing as the major cause for losses in the diamond sector after he was questioned about the missing US$15 billion on the BBC Hard Talk television programme.

Sources said First Element’s monopoly in marketing diamonds, which has also rendered the MMCZ redundant after taking over international marketing of the precious stones, raised suspicion that it could be colluding with buyers to reduce prices.

Average diamond prices per carat have gone down since the beginning of the year, resulting in reduced returns to the fiscus.

Reports suggest that the company has “a shady past” after it was allegedly kicked out of Botswana — an allegation the company denies.

The company reportedly pockets one percent of sales from both buyers and diamond companies for marketing the stones.

Apart from marketing diamonds, First Element also cleans the precious stones before sale.

First Element’s relationship with Prof Gudyanga has also come under the spotlight with the permanent secretary accused of protecting the company.

Prof Gudyanga declined to discuss the matter.

“I can’t answer to such issues on the phone. Besides, some of the allegations were made in Parliament so that is the platform where I will respond to the allegations,” he said.

First Element country manager, Mr Tim Wikes said the company will hand over its operations to locals early next year.

“First Element won a competitive bidding process initiated by the Ministry of Mines and Mining Development and was awarded a one-year tripartite contract in July 2014 between the Minerals Marketing Corporation of Zimbabwe and the then 6 operating diamond mining companies.

“Furthermore, with respect to our exit strategy, a senior Zimbabwean manager has been engaged at Fetch Minerals as the assistant country manager, and as an understudy to the incumbent country manager,” he said.

Mr Wikes denied allegations that they were undervaluing diamonds.

“Firstly, we do not value the goods nor do we accept the results. This is done by MMCZ and ZCDC. Secondly, our business model is very uncomplicated.

‘‘First Element gets a small percentage of the diamonds sold as a fee. If we do not sell or we attract low prices, then the fee is smaller.

If ZCDC does not sell, we do not get a fee. Thirdly, we do not value the diamonds.

‘‘We facilitate the sale and manage the tenders.

Our fee is derived from the gross sale and we are therefore extremely motivated to get the highest prices possible,” he said.

Mr Wikes said First Element’s modus operandi was transparent as tenders are held monthly.

He said MMCZ and ZCDC officials are involved in the tenders, with a heavy presence of police officers.

“In the last few months, we have had 25-30 companies attending daily and around 35-45 individual buyers attending. FE has done incredibly well with the number of companies that attend the tenders when compared to the attendance at sales before our arrival. The international buyers now come in their scores to buy diamonds in Harare,” said Mr Wikes.

“The dollar per carat is actually not that far down in recent months as the ZCDC is now the sole miner and has historically recorded higher prices than its competitors at Chiadzwa. The relative drop in ZCDC prices in the last three months is due to the retreatment of tailings dumps which by their nature normally have a lower dollar per carat as the ground has already been treated once.

“The dollar per carat is normally driven by the footprint of the deposit being mined.

In the case of retreating tailings, the percentage of industrial stones normally increases and the percentage of gem stones decreases.”

Zimbabwe started auctioning its diamonds locally in 2014 after having experimented with the Dubai and Antwerp markets.

The last auction held at Antwerp ended in disaster after the precious stones were temporarily seized by Amari platinum and 14 white former commercial farmers after their litigation against the Government.