ACR may have sparked the chaos at Marange

In the movie, Godfather III, Mafia don Michael Corleone tells his protégé Vincent Mancini why it is dangerous to hate someone.  Vincent wants to kill Joey Zasa because Joey persistently makes derogatory remarks about his godfather. Michael tells Vincent that Joey is nothing. “He’s a small-time enforcer. He bluffs, threats, but nothing.” Vincent insists he must kill Joey but Michael tells him: “No! Never hate your enemies. It affects your judgment.”

This is the dilemma confronting Zimbabwean President Robert Mugabe. The world’s hatred for Mugabe and equally his virulent attacks on the West have totally clouded issues in this Southern African state, especially its diamonds.

The country’s alluvial diamonds in the eastern district of Marange are now referred to as “blood diamonds” yet that term was originally meant for “rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments”.

Mugabe has been blamed for the chaos that has engulfed Marange over the past three years and for gross human rights violations perpetrated by the army when it was deployed to clean up the area.

He survived a concerted campaign to have the country suspended from the regulatory body, the Kimberley Process Certification Scheme. Attention was so focussed on Marange that the world forgot that the country had two other legitimate diamond mines that were operating within the KPCS  – privately-owned River Ranch near Beitbridge and Rio Tinto-owned Murowa near Zvishavane

The octogenarian leader has not endeared himself with the world and his own people because of the high-handed, military-style, manner in which he has handled crises like the clean up of urban areas known as Operation Murambatsvina (Throw out trash) and those in Marange, Operation Chikorokoza Chapera (Illegal mining is over) and recently Operation Hakudzokwi (No return).

But 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.

The Zimbabwean-owned but London listed company has been cashing in on the chaos by playing victim of the Mugabe regime after being booted out in 2006.  It upped the tempo in September following its High Court victory which confirmed it was the legal owner of the claims that the government is working on and started portraying itself as the innocent broker, prepared to work with the government, despite the government’s intransigency, to bring back sanity to the area and of course earn the cash-strapped government much needed revenue.

No one has bothered to look at how ACR got the claims, in the first place, yet, the Kimberly Process team that visited Zimbabwe in May 2007 to check on whether the country was complying with the KPCS clearly stated in its report that ACR had “applied for the rights to the area but in a manner that seemingly bypassed the Ministry of Mines in Harare”.

The ACR story has all the ingredients of the murky world of diamonds but the world has turned a blind eye on all this because of its fixation with Mugabe ostensibly because everything he does has one ulterior motive, to maintain his grip on power.

Facts have been distorted. Diamonds in Marange, for example, were not discovered in 2006 when the chaos started as is now widely touted. They were discovered four years earlier by De Beers, the world’s largest diamond miner.

De Beers started prospecting for diamonds in the area in 2001 through its subsidiary De Beers Zimbabwe (DEBZIM) and discovered alluvial diamonds in 2002. De Beers’ spokesman Tom Tweedy said the company did not exploit the diamonds because it was not interested in alluvial diamonds but in kimberlites.

“The highly unusual nature of this deposit (geologically) together with the presence of these alluvial diamonds in the Exclusive Prospecting Order 1523 suggested that it would be prudent to understand the deposit geologically and investigate possible sources of these diamonds with reference to DEBZIM’s prospecting activities for kimberlites (not alluvial) in this EPO,” Tweedy said.

Natural diamonds are formed at high-pressure high-temperature conditions existing at depths of 140 to 190 kilometres in the earth mantle. Carbon-containing minerals provide the carbon source, and the growth occurs over periods from 1 billion to 3.3 billion years.  Diamonds are brought close to the earth surface through deep volcanic eruptions by a magma which cools into igneous rocks known as kimberlites and lamproites.

Once diamonds have been transported to the surface by magma in a volcanic pipe, they may erode out and be distributed over a large area. A volcanic pipe containing diamonds is known as a primary source of diamonds.

Secondary sources of diamonds include all areas where a significant number of diamonds have been eroded out of their kimberlite or lamproite matrix, and accumulated because of water or wind action. These include  alluvial deposits and deposits along existing and ancient shorelines, where loose diamonds tend to accumulate because of their size and density.

De Beers was interested in the primary source of Marange’s diamonds.

ACR, which was founded in 2005, must have been watching De Beers closely. First it enlisted the services of a former De Beers geologist in October. The geologist had left De Beers in February.

Six months later ACR pounced when De Beers allowed a three-month window during which it had no claim to the Marange diamonds.  Its EPO expired on 28 March 2006. It had applied for a final one-year extension in February. But by the time the EPO was renewed, ACR had already registered its claims.

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.

De Beers learnt about the new owner after reports that there was a diamond rush in Marange and that there was uncontrolled diamond mining. It got concerned because the illegal mining activities were linked to the company.

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.

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.

ACR confirmed that things had got out of hand in its interim report for 2006 but added that “(the illegal miners) have now been largely cleared from the area by the police and should shortly be stopped entirely by fencing”.

Tweedy says De Beers did not want to be linked with any illegal mining so it informed the government in July 2006 that it was abandoning its EPO though its licence was only expiring in March 2007.

 “The government put a reservation on the area and the ground reverted to the government,” Tweedy said.  “That was the end of DEBZIM’s involvement with the EPO. DEBZIM would like to state that [it] has never mined or bulk sampled this deposit, and no illegal diamond digging took place whilst DEBZIM was actively managing this ground.”

ACR was left with a free reign after De Beers pulled out. The company listed on the London Stock Exchange’s Alternative Investment Market in June. It only announced that it had discovered diamonds in Marange in September but was booted out shortly thereafter.

According to a statement it issued to shareholders in December 2006, ACR said its title to the Marange Diamond deposits had been cancelled because the government argued that “that title should not have been granted in the first instance because of a pre-existing exploration licence over the same area”.

But there could have been other reasons why ACR was booted out. Farai Maguwu, director of the Centre for Research and Development, a Zimbabwean human rights group that has been calling for Zimbabwe to be suspended from the KPCS told Fast Company this month that ACR had run afoul with Mugabe because the company had sold shares to his political enemies.

“You play with people who are on the wrong side of power, and you mess up,” he was quoted as saying.

President Mugabe, however, believed that some of his own lieutenants had teamed up with ACR. He alluded to this at the ZANU-PF annual conference at Goromonzi in December 2006.  This was unacceptable to him as it was tantamount to dining with the enemy.

"If you are going to be harnessed by European companies which are already in it (mining), which we are fighting against, then we will be fighting against you as well, ndozvamunoda here izvozvo? (Is that what you want?," the asked the conference.

The Voice of America reported on October 3 this year, soon after the company had won its case in the High Court, that Mujuru had a 3 percent stake in ACR.

Whatever the case, there is a strong suspicion that ACR benefitted from its alliance with the former De Beers geologist.  The geologist told The Insider this was not the case because he was not working in the Marange area.

 “Legally there is no window period between an EPO's expiration and time of applying,” the geologist, who is still working for ACR as a consultant, said. “You apply before the EPO expires. If you apply when the EPO has expired then that application is null at law. You apply approximately three months before expiration for the Mining Affairs Board (MAB) to consider your application. Information about expiring of EPOs is public information so there is no inside information about public information.”

On whether ACR had benefitted from his knowledge that there were diamonds in Marange, the geologist said: “I did not really know that there were diamonds at Marange because that was not my project. I was managing the Save project to the south.”

Sources said the geologist could not admit passing on any information about his activities while working for De Beers because he had signed a confidentiality contract with the company.

But the speed with which ACR gathered diamonds before putting up any structure, clearly indicates that it had inside knowledge about where the alluvial diamonds were.

According to the recent judgment in which Judge Charles Hungwe granted the company back its title the company was to be given back 129 400 carats that were confiscated by the police when it was kicked out of Marange.

This was a huge catch for a company that had not even set up any infrastructure. River Ranch mine last year produced 75 000 carats, according to Finance Minister Tendai Biti. Murowa produced 237 000 carats.

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