In Marange things fall apart ... again

Vi­cious court bat­tle pits min­ing sub­sidiary Grandwell against the govern­ment of Zim­babwe, their 50% part­ner in Mbada Di­a­monds

CityPress - - News - SU­SAN COMRIE su­san.comrie@city­press.co.za

It was around mid­night on Fe­bru­ary 23 – ac­cord­ing to the po­lice re­port – when the power was cut, plung­ing Mbada Di­a­monds in Chi­adzwa, Zim­babwe, into dark­ness. In the “com­plete black­out” that fol­lowed, in­trud­ers broke into the high­se­cu­rity red zone and tar­geted the se­cure drop boxes where the un­cut di­a­monds were stored. “They used an iron bar, and broke the pad­lock and seal, to gain ac­cess to the ... box,” says a po­lice re­port.

The pre­vi­ous day, Zim­babwe’s min­is­ter of mines, Wal­ter Chid­hakwa, had halted all di­a­mond min­ing in the Marange di­a­mond fields, and po­lice moved in to evict for­eign min­ing com­pa­nies.

Mbada Di­a­monds, partly owned by South African scrap-metal com­pany Recla­ma­tion Hold­ings, and in­di­rectly Old Mu­tual, was one of the mines tar­geted.

There are vastly dif­fer­ing ver­sions of what hap­pened. Po­lice say they faced “run­ning bat­tles” with “il­le­gal pan­ners” who ap­pear to have been aided and abet­ted by mine em­ploy­ees.

But David Kas­sel, the chair­man of both Recla­ma­tion Hold­ings and the com­pany’s di­a­mond min­ing sub­sidiary Grandwell Hold­ings, claims that ter­ri­fied em­ploy­ees were rounded up by po­lice and threat­ened while hun­dreds of il­le­gal pan­ners in­vaded the con­ces­sion area, steal­ing ev­ery­thing from di­a­mond-bear­ing ore to metal roofs and gen­er­a­tor bat­ter­ies.

“The po­lice ar­rived ... and told all of our peo­ple to get off the mine. In the mid­dle of pro­duc­tion, they just stopped ev­ery­thing,” says Kas­sel.

The chaos that en­sued over the next few days ended the rel­a­tive calm that has pre­vailed in Marange since the army’s bru­tal crack­down on the di­a­mond fields in 2008.

It has also launched a vi­cious court bat­tle, pit­ting Grandwell against the govern­ment of Zim­babwe, their 50% part­ner in Mbada.

In the Harare High Court in March, Jus­tice Joseph Ma­fusire de­scribed it as the break­down of a com­mer­cial mar­riage.

“The mar­riage en­dured for six or seven years. Mbada was hap­pily min­ing. But ap­par­ently the govern­ment was brood­ing ... The govern­ment felt its part­ners were be­ing un­faith­ful,” he said.

Dur­ing a tele­vised birth­day speech two months ago, Pres­i­dent Robert Mu­gabe openly ac­cused Marange’s for­eign min­ing com­pa­nies of loot­ing.

“We have not re­ceived much from the di­a­mond in­dus­try at all. I don’t think we have ex­ceeded $2 bil­lion, yet we think more than $15 bil­lion has been earned,” he re­port­edly said. “Lots of smug­gling and swin­dling has taken place and the com­pa­nies that have been min­ing, I want to say robbed us of our wealth ... That is why we de­cided that this area should be a mo­nop­oly area and only the state should be able to do the min­ing in that area.”

Start­ing in March 2015, the Zimbabwean govern­ment, which al­ready holds a 50% stake in all di­a­mond min­ing com­pa­nies, an­nounced plans to con­sol­i­date all for­eignowned com­pa­nies into a sin­gle com­pany.

The plan came with an im­plied threat. “De­cid­ing not to par­tic­i­pate means com­plete ter­mi­na­tion of re­la­tion­ships,” Min­is­ter Chid­hakwa warned. “The com­pany may never be al­lowed to par­tic­i­pate in di­a­mond min­ing in Zim­babwe again in fu­ture.”

Court records show that ne­go­ti­a­tions over the con­sol­i­da­tion were on­go­ing un­til Fe­bru­ary when Chid­hakwa blind­sided the for­eign min­ing com­pa­nies, call­ing a press con­fer­ence to re­veal that their per­mits had ex­pired. He told the mines they had 90 days to pack up their equip­ment and leave.

“It’s na­tion­al­i­sa­tion,” Kas­sel says. “No mat­ter what they like or don’t like to call it, that’s what it is ... You want to take an as­set that be­longs to a for­eign com­pany and ex­pro­pri­ate it for no re­turn.”

When City Press ar­rived at Recla­ma­tion’s Illovo of­fice, Kas­sel was at his desk sur­rounded by a wall of screens that use to pro­vide a live video feed of Mbada’s op­er­a­tions in east­ern Zim­babwe.

“At no time did we say we are anti the con­sol­i­da­tion,” Kas­sel said. “We said we’re pos­i­tive about it, we’ve got open minds about it. How­ever, it has to be worked out.”

One of the is­sues is how to value each mine’s stake in the fu­ture con­sol­i­dated com­pany. Grandwell, who claims to have spent $40 mil­lion on ex­plo­ration, wants to be val­ued on “proven, probable and pos­si­ble re­serves”, whereas the govern­ment says the di­a­monds in the ground be­long to the coun­try.

As part of an ur­gent in­ter­dict ap­pli­ca­tion filed in Fe­bru­ary, Kas­sel warned that the govern­ment’s “un­law­ful scheme ... will in­evitably sig­nal the demise of the en­tire di­a­mond min­ing in­dus­try in Zim­babwe with dis­as­trous fur­ther im­pact on the al­ready dev­as­tated econ­omy”.

Last week, Zim­babwe’s vice-pres­i­dent, Em­mer­son Mnan­gagwa, an­nounced that the govern­ment had launched an au­dit of all seven di­a­mond min­ing com­pa­nies in Marange to de­ter­mine whether di­a­mond rev­enue had gone miss­ing.

Kas­sel says they have never been di­rectly con­fronted with claims that they skimmed off di­a­mond rev­enue, and in court papers claimed that since Mbada started min­ing in 2009, they have paid over $472 mil­lion to Zim­babwe’s fis­cus. De­spite this, Kas­sel claims that Grandwell has made “not a cent” for roughly the past two years from their di­a­mond min­ing op­er­a­tions.

When City Press asked to see Grandwell’s fi­nan­cials as proof, Kas­sel threat­ened to walk out of the in­ter­view: “Let us just put things on the right foot­ing. If you in any way ques­tion what I say to you as be­ing un­fac­tual, I will end this in­ter­view now,” he said.

Grandwell’s le­gal team has been keen to paint their fight as a David-andGo­liath bat­tle, with Kas­sel be­ing the only per­son will­ing to stand up to Mu­gabe. But court records sug­gest the story is not quite so sim­ple. Eye­brows were raised in 2009 when Grandwell was granted per­mis­sion to mine a 1 000-hectare con­ces­sion in Marange. Not only did the com­pany have lit­tle ex­pe­ri­ence in min­ing – Recla­ma­tion’s main busi­ness is scrap metal – but the com­pany was granted a min­ing right in per­pe­tu­ity, de­spite the law re­quir­ing spe­cial grants to come with an ex­piry date.

As part of the 50-50 joint ven­ture, the govern­ment-owned Marange Re­sources agreed to take re­spon­si­bil­ity for se­cur­ing and main­tain­ing the nec­es­sary min­ing per­mits – which they failed to do.

Court papers the min­is­ter filed show that, for the most part, Marange Re­sources only ob­tained prospect­ing rights, and most of th­ese ex­pired in 2013 af­ter they failed to pay the nec­es­sary li­cence fees.

Asked whether, as the op­er­a­tional arm of the com­pany, Grandwell ever checked whether the nec­es­sary min­ing per­mits were in place, Recla­ma­tion’s le­gal ad­viser, Gra­ham Wolf, said they had “re­lied on the con­trac­tual covenants given by Marange and guar­an­teed by ZMDC [the Zim­babwe Min­ing Devel­op­ment Cor­po­ra­tion], as well as the fact that the chair­man of Mbada was a govern­ment ap­pointee”.

The one ex­cep­tion, on which Grandwell is pin­ning its hopes, is Spe­cial Grant 5244, which was is­sued in per­pe­tu­ity.

“The word there is in per­pe­tu­ity – it doesn’t say for one year, for two years; it says in per­pe­tu­ity. Be­cause when peo­ple in­vest a ma­jor amount of money, they want to know that their ten­ure is se­cure,” Kas­sel says.

How­ever, the min­is­ter ar­gued in court papers that the is­su­ing of an open-ended li­cence, even by mem­bers of his own govern­ment, was il­le­gal.

The gen­eral man­ager of the ZMDC, Syd­ney Si­mango, echoed this in his own court papers when he told Grandwell not to rely on prom­ises the ZMDC had them­selves made. “It is ac­cord­ingly mis­guided of [Grandwell] to place re­liance on war­ranties or rep­re­sen­ta­tions ... which run foul to the law of the land.”

Fol­low­ing an ur­gent court ap­pli­ca­tion in Fe­bru­ary, the courts in­structed the govern­ment to al­low Grandwell to re­turn to the mine.

When Marange Re­sources CEO Mark Mab­hudhu ig­nored the court or­der, Jus­tice Ma­fusire re­acted an­grily, say­ing in his rul­ing that is was clear Mab­hudhu “would not take or­ders from any one, in­clud­ing the court, un­less and un­til his min­is­ter had in­structed him to do so”.

The govern­ment is ap­peal­ing the judg­ment, but for now Grandwell’s se­cu­rity has been al­lowed to re­take pos­ses­sion of the mine, but they can­not mine un­til they ob­tain proper min­ing rights.

Grandwell has launched a sec­ond court ap­pli­ca­tion to try to force the min­is­ter to re­in­state their min­ing per­mits.

Jus­tice Ma­fusire, who ac­knowl­edged he “must sound like a bro­ken record”, warned both sides to re­spect the rule of law. “This is para­mount. It is a tenet the courts will de­fend to the last judge stand­ing. The al­ter­na­tive is an­ar­chy,” he said.

Mbada Di­a­monds

Wal­ter Chid­hakwa

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