ACR responds to Marange story

African Consolidated Resources has finally responded to inquiries from The Insider following the publication of its story that the company might be more to blame for the chaos in Marange. In the interest of fair play we have agreed to publish their response in full. This is not in any way meant to suggest that any of the facts that we raised in our story are incorrect. We are merely giving ACR a voice. It is up to the reader to decide who is telling the truth.

Here are ACR's comments:

1. 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...

2. 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.

3. 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).

4. 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.

5. 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.

6. 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.

7. 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.

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

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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. The flip side is that alluvial deposits are FAR LESS predictable in
size, extent, average grade etc so most major mining companies prefer pipes.

While Marange deposit is alluvial, it is widely believed that the source was
originally a lamproite that may no longer exist and may have been hundreds
of kilometres from the current site.

~~ $$ / 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, 129,00
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.

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