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ACR responds to Marange story

Here are ACR's comments:

U say "... a closer look at the fiasco in Marange shows that while Mugabe's government made things worse, London-listed African Consolidated Resources (ACR), currently the legal owner to the diamond claims in the area, sparked the whole thing and is probably more to blame for the chaos"

We most strenuously deny this. We have acted properly and lawfully throughout...

U say "... The Zimbabwean-owned but London listed company.... "

ACR was originally a Zim company founded by Zimbabweans - true.... However it is incorrect to call it "Zimbabwean - owned" any more. The very act of raising capital on an exchange is a process of issuing equity in return for the investment of cash... which has all been invested here. Of course this means that by now only a minority of ACR shares are Zim-owned and I am the largest Zim shareholder at some 3%. We intend listing on the Zimbabwe Stock Exchange now that it is dollarized and thereafter, Zimbabweans will hopefully gain a much larger chunk of equity.

U say "....[ACR] has been cashing in on the chaos by playing victim of the Mugabe regime... "

Pray Tell -- How on Earth could ACR "cash in" ??? The company has lost millions (possibly hundreds of millions) in lost profits and revenue. The country is a victim and ACR too but we have not cashed in.. Perhaps you think we are paid for stories? We define and mine mineral deposits. We can nit profit from being a victim.

Furthermore we have never been political in our statements or comments. We have been very cautious about commenting and have always stressed that we work with the Government of the day and have always expressed the belief that the government will eventually rationalise and protect this strategic assets from the looting that is denying the country financial independence.

I was 17 years old (below voting age) when the current Pres was elected. If I felt I was victim as you suggest and wished to cash in I would not have lived here most of my adult life and I would not have founded ACR in Zim.

Sensationalist media may "cash in" on this stragedy but not ACR and not Zimbabwe. They are losers until this rationalises.

ACR has repeatedly offered a JV with Govt in the style of DEBSWANA (De Beers / Botswana).

U say ".... [ACR] started portraying itself as the innocent broker... "

This company has always been ethical and transparent in its dealings as required by the nature of being a publicly listed company on an exchange with strict rules. Subsequent to a lengthy and detailed legal proceedings which culminated in a very fair and balanced judgement by the High Court, (which became unavoidable due to intransigence by the Ministry), ACR reiterated its desire and willingness to work with Govt. I believe this was adequate proof of our bona fides.

U say " .. No one has bothered to look at how ACR got the claims, in the first place .."

Actually the whole world and whole legal fraternity have pored over the acquisition of claims / rights with a magnifying glass. It is obvious that the 3 year long legal proceeding was all about the legality of ACR claims and the legality of the method used -- the method which is, by the way, exactly that method prescribed by the Mines and Minerals Act of Zimbabwe --.

I attach a legal opinion from the early point of our proceedings from our legal counsel.... Please read it. For balance, that opinion is also commented on by a retired Justice and former Sec to the Cabinet under Prime Minister R G Mugabe. Also for balance, I copy you the AG's opinion from 2006 which appeared in the media in 2007. Please read this first and I am happy to answer any queries arising therefrom.

In their defence in the High Court, the Respondents (MMCZ, ZMDC, Minister of Mines and Mining Commissioner) failed to demonstrate any illegal or improper pegging of claims by ACR. The KPCS comments are noted albeit with no knowledge of Zim mining law, but remember they also recommended on both vistis that the matter of title be resolved and respected according to Zim law and courts... The High Court having ruled subsequently, this recommendation has been ignored.

U say "The ACR story has all the ingredients of the murky world of diamonds..."

Thus is an unfair association... We have done nothing illegal and nothing unethical or improper...

Furthermore___ Note that ACR is about far more than diamonds. We have made world-class discoveries in nickel, gold, rock phosphate (used for food production as fertiliser), Platinum and hopefully soon we will talk more of a very exciting copper project.

Marange is by no means our largest nor most important project and we are not a part of the "murky" diamond business.

The exploration and mining side of the mineral is usually the cleanest. ACR is a company founded by Zimbabweans, focused on developing Zim's future mineral wealth, creating shareholder value and profit (of course), managed, run and operated by Zimbabweans. We are the key ingredient (together with other local and foreign firms that are now starting to explore here) to the long-term cycle required to develop Zimbabwe's great mineral wealth.

The LSE listing allows us access to capital for any good project at short notice. The Pres and the new GNU call for Foreign Investment. We have been bringing it in for 5 years now. ACR has spent more on exploration in Zimbabwe in the past 5 years than all of our peers / competitors combined.

I agree that large parts of the diamond industry are murky and populated with dodgy characters but meet us in person first before you tar us with that brush.

ACR's subsidiary discovered diamonds in Marange in 2006 and announced the discovery to both the Zim Mining Commissioner and to the LSE as required by law and regulations.... Were we the first to discover diamonds there? - I cannot make that assertion either way but at the time (Sept 06) I certainly believed that.. De Beers' Zim exploration subsidiary was Kimberlitic Searches (Pvt) Ltd (as far as I know Debzim was a nickname). They were active from the early 1990's throughout Zim. It is interesting that you say they discovered diamonds in 2002. I cannot comment on Be Beers for ethical reasons, for legal reasons and for reasons of insufficient knowledge. You however have spoken with them....... As far as I am aware, such a discovery was not announced by De Beers so your assertion surprises me.

It is important to note that Industrial diamonds were (until very recent amendment) specifically excluded from the definition of Precious Stones in the Mines and Minerals Act and in the Precious Stones Trade Act.

I simply can't comment further on De Beers but your technical comments on occurrence of diamonds is sound.

ACR was founded in late 2003 not 2005 as suggested. The London entity was registered in 2005 as preparatory work for our LSE listing.

ACR & Diamonds & De Beers --- It is pertinent to note that the occurrence of economic diamond deposits within Lamproites (as opposed to their volcanic cousins kimberlites) was not fully understood until the 1980's. It is important also to note that the world's largest diamond mine (in terms of total carats produced) is the Argyle mine in Western Australia - a lamproite. De Beers controlled the exploration rights in that area for many years (1970's 1980's) and did not discover the Argyle deposit. Once they relinquished the ground, others looked again and found the deposit. The concept of diamonds in lamproites is, as a result, now far better understood but still less understood than kimberlites.

Beside the technical interest factor, there is a recent precedent where ground relinquished by De Beers gave rise to a major discovery. As a founder of ACR I was fully aware of that precedent.

In addition, ACR acquired an exploration company active widely in Zimbabwe during the 1990's which had been closed due to the sell-off of its parent company, Delta Gold. That company, Cratonic, had a vast database of information from work done in Zimbabwe including some work done in joint venture with De Beers.

It is true that ACR recruited staff retrenched from De Beers (with the knowledge and approval of De Beers who were pulling out of Zim). We also acquired some of De Beers assets such as laboratory equipment and pickups.

Were we "watching De Beers closely " as you state ??? Lets say that is an exaggeration. We read De Beers' published EPO reports from the Geological Survey and studied the work of Cratonic and Rio Tinto. This is standard practise and we make no apology for it. We have pegged significant acreage of ground following De Beers' EPO expiries / abandonments but also on ground that had nothing whatsoever to do with De Beers. All of which has been pegged legally in accordance with the Mines and Minerals Act.

Needless to say, the only ground from which we have been " booted off " is the ground on which we found diamonds in Marange.

ACR had no knowledge of De Beers' application for extension of EPO 1520 & 1523 and assumed they were relinquishing it as they were elsewhere as part of their pull-out. Extension applications are not public domain. Accidental expiries are treated no differently

I reiterate that ACR had no knowledge about any discovery of diamonds on any of this ground.

When the De Beers EPO 152 / 1523 expired on 28 March 2006, ACR pegged ground April through June. The subsequent purported "renewal" of these EPO's in mid-June are a nullity in law as something expired may not be renewed (see legal opinions and High Court judgement). De Beers abandoned the EPO shortly after this purported "extension". De Beers never applied for new EPO's in that area. Applications for new EPO's are public domain so I would have known.

I have no idea why De Beers did not develop the Marange Resource if they indeed knew about it as you assert.

I also repeat that ACR have made world-class discoveries in 5 mineral classes and are not a company which was formed to spy on another and "pounce" on ground.

U say in this regard ... "... So from June, the Marange diamonds were legally owned by the two companies. ACR had registered its claims with the local mining commissioner in Mutare while De Beers' EPO had been renewed by the Mining Affairs Board in Harare "

This is factually incorrect and very misleading. De Beers EPO could never have been renewed as proven by the High Court ruling. It expired and ceased to exist in March 2006 and could never be legally renewed post-expiry

Secondly, in June 2006, the "diamonds" had not yet been discovered by ACR, the legal owner of mining rights in the area.

Finally, it is important to view Zim law in the correct light -- - all minerals should be considered the property of the people of Zimbabwe and mining companies acquire rights to mine and process according to the law. ACR recognise this and recognise that extraordinary finds require extraordinary treatment. Hence our openness and willingness to exploit this national asset for the national benefit as well as our corporate benefit. We "play the honest broker" because we are the honest broker.

U say - - "..Sources say immediately after registering its claims, ACR invited locals to help it collect the diamonds. But because the area had not been fenced, it failed to control the rush that followed"

This is absolutely false. When ACR first discovered and announced gem diamonds, it appears the artisanal diggers (local villagers mostly at that time) discovered this simultaneously. Unfortunately, the prescribed limit of time by which such discovery must be made public did not give us sufficient leeway to fence and secure the area. In spite of calls for assistance (as dictated by law) to the Mining Commissioner and the ZRP, ACR did not receive any assistance in control whatsoever. Shortly after the announcement by ACR, the Minister of Mines arrived at site and exhorted the villagers and l0cal to help themselves as was reported in the Manica Post. Shortly thereafter ACR personnel were forcibly evicted by ZRP, followed by a stampede that escalated to some 15,000 diggers and coincided with a local government election taking place in that area.

Shortly after the local elections, (as reported in my interims quoted by you) we were allowed to return to site and immediately proceeded with fencing and were for a short period ably assisted by the ZRP.. Somewhat apologetically thereafter, the ZRP instructed us that they had been ordered to evict us once again. This was prior to the completion of fencing.

We sought and gained a spoliation order from the Mutare Magistrates Court shortly thereafter which instructed the Minister and ZRP to cease interference with ACR activities but this was ignored, forcing to eventually seek relief from the High Court.

A litany of lawlessness I am afraid.

U say "ACR chief executive Andrew Cranswick has not answered any queries from The Insider dating back to June this year. He also refused to answer questions over the phone this month but confirmed that he had received questions sent by The Insider by email. He said he would respond to these questions by email but has not done so up to now."

Charles that is untrue and unfair. I have just yesterday sent u a copy of my email to you to which was attached Hungwe's Judgement which I felt would most impartially answer your single query iro the De Beers EPO. I have had no single other enquiry by email or by telephone --- at least none I recall and if I have not recalled one then I apologise and request your understanding of the fact that I am extremely tied up in trying to prevent the unscrupulous looting by foreigners of our national asset while still trying to keep our other outstanding mineral projects developing for the corporate and national good.

The intention was never to fob you off or hide information and I wish I had an earlier opportunity to set the record straight and assist you in writing a newsworthy item.

It is important to note that in Zim Law a Government Reservation of ground automatically cancels EPO's (there were none valid at that time) but specifically does not affect the rights accorded by pre-existing mining claims which ACR had previously acquired.

ACR never knowingly sold shares to any "political enemies" of any person. Such a rumour has been perpetuated and I deny any such fact. In addition, a public company has shares available for sale through the stock exchange to the public and the Board has no involvement nor control over such transactions. ACR is a-political as stated above. I am unaware of VOA's declaration of a "3% stake" by a "Mujuru" and I refute that.

Companies employ people for their contribution. ACR is no different. We employ geologists for their technical knowledge and sometimes regional ideas or knowledge. ACR has never benefitted from any proprietary intellectual property of any other company without that company's consent or knowledge. We have acquired no such intellectual property from De Beers.

Your comments about quantity of diamonds are about a good, solid, vital question and one I will be happy to answer. But it is more a technical answer than a political or sensitive one. The answer will also demonstrate the importance of this deposit being managed wisely, sanely and responsibly.....

Before we dwell on the carats recovered by ACR, we must try to better understand the criteria for evaluation and economics:

Every diamond mine profile is very different and the determination of the economics or otherwise (ie whether the mine will be profitable) needs to consider a variety of vital facts including:

• The grade in "cpht" --- ie the number of "carats per hundred tonnes" of mineable ore that the deposit will hold on average.
• The Average value per carat - bearing in mind that there may be several classes of diamond within the deposit and that the value differences between classes / qualities can be enormous.
• The estimated cost of mining the ore -- this will depend on the depth to which mining is intended, the shape of the surface and underground expression, the costs of power, diesel, services and infrastructure etc.
• The mine life and therefore the allowance for payback of capital invested of a reasonable time period as a part of mining cost.

The above factors will vary widely as you can imagine especially given the four common deposit types - alluvial, marine - alluvial (ie offshore ships), lamproite pipes, kimberlite pipes.

Grade:

The biggest difference between Marange and just about any deposit is the grade in cpht (carats per hundred tonnes).

While we did have some suspicions on this, we are prohibited from announcing findings until signed off by independent researchers after vetting exhaustive work. Work we had only just contemplated prior to being removed.

Now that we have had site of grades reported by ZMDC on a regular basis, it appears that even with very primitive extraction methods and shockingly primitive security measures, the ore body must (at least in certain parts) average a staggering 2 000 cpht or more. ZMDC regularly achieved this level (or higher) but we believe there was much left behind and I suspect high shrinkage levels. In other words the grade could be much higher.

Let us compare this. Murowa runs at approx 119 cpht. Less than a 10th of the above figure. Murowa is regarded as one of the better kimberlite-based diamond deposits in the world and is the envy of many. 119 cpht is quite high as a grade.

Exploration reports I have seen for the River Ranch kimberlite, from the early evaluation period (prior to current ownership), indicate a grade of around 37 cpht.

Letsing pipe in Lesotho has a grade of 2.5 cpht (but each carat is very valuable otherwise the pipe would be useless).

Many Kimberlites and lamproites are entirely barren.

It is common for grades in alluvial deposits to be far richer than kimberlite and lamproite pipes due to the concentrating nature of water action.

$$ / CARAT :

The "Four C's" pertain to valuation of Polished Diamonds - Colour, Carats, Clarity, Cut. Obviously only the first 3 apply to rough diamonds. The "Carats" obviously means size of stone and in a mining environment the average size of stone is obviously important for this valuation

Value per carat is extremely important. Murowa has a relatively high $/carat with reasonable sizes (ie "carats"), mostly good colour and clarity. I would personally estimate their average at $70 - $120 / carat but this is only an educated guess... I do not know the R Ranch values. Letsing has an extremely high value per carat as almost all the stones are very large when occasionally found and many are of a very good white colour. One of their stones was recently sold for more than $12 million prior to cutting - more than $1,100 per carat. They probably average at $500 / carat.

Marange has a wide range of stones. The majority (probably 60-70%) are very low value as they are industrial and/or Bort ranging from $8 to $12 / carat. Another range of approx 15-20% will be around $25 - $40 / carat. It is the top 10 - 15% that really will produce the big number values at Marange... these prices will range anywhere from $70 / carat to $100,000 per carat. They are large, clear white, yellow, blue and green gem diamonds. Weighted across the board we expect approx average of $30 - $40 / carat.

Comparing Marange with Letsing mine is informative as they are at opposite ends of the grade scale and opposite ends (the other way) in the $/carat scale.

Letsing: 2.5 carats per hundred tonnes x $800 / carat implies $2,000 value per 100 tonnes or $20 per tonne of ore.

Marange: 2,000 cpht x $35 / carat = $75,000 value per 100 tonnes or $750 per tonne of ore. (ie a multiple of 37 times richer)

COST Per tonne:

Marange costs will be extremely cheap for the open cast gravels but more expensive for the underground reef mining but not more than $10/tonne. --- ie very profitable and why it must be shared equitably and managed responsibly.

Life of Mine

Dependent on rate of mining, Marange will last 5 to 15 years. Murowa could last 50 years. This is the trade-off on grade.

Bearing the grades described and experienced above it is not difficult to see how one might accumulate a large number of stones in a very short space of exploration within easily accessible gravels. As an example, as we bull-dozed a fence line, there were suddenly excited screams as villagers chased the dozer seeing diamonds flicked into the air by the upturning roots of trees. This was widely witnessed. A surreal sight indeed. Needless to say we immediately changed the location of the fence line..

Murowa is in pilot-phase only - read their releases. They have a major expansion planned but have shelved it pending the respect for law and mining title -- Marange being the test-case. I expect they could produce over 2 million carats per annum after their first-phase expansion.

The largest ever production was from Argyle Mine in Western Australia (where De Beers declared no such deposit could ever exist) who in 1994 mined 42 million carats.

ACR never sold a single diamond. The Marange stones are unique and extraordinary in outward appearance. Given the extraordinary grade, 129,000 carats is not very much. Look how many MMCZ bought from illegal panners in the aftermath of the illegal eviction of ACR. We studied the stones using a variety of experts. We did this for some time before having the stones illegally seized in the middle of the night by ZRP officers acting illegally on the purported authority of the CEO of MMCZ, Onnessimo Moyo.

MMCZ have failed to return the diamonds to ACR in spite of the High Court order to do so and remain in contempt of court.

In conclusion, the ZMDC has entered into a JV via a secretive shelf company in Mauritius, with The New Reclamation Group (Pty) Ltd - a scrap metal dealer. A private South African company - not publicly listed, not transparent.

And all this in contempt of court and with complete disregard for the respect and rule of law.

The biggest victim is the people of Zimbabwe.

Andrew Cranswick
CEO- ACR

Posted- 9 December 2009

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© Insider Publications 2009. This story is available for syndication. Contact the publisher at charlesrukuni@insiderzim.com