Sale of diamond mine sparks feud THISDAY REPORTER Dar es Salaam THE sale of a controlling stake in Williamson Diamond Mine based in Shinyanga Region to a foreign company has sparked controversy in Tanzania, with several experts questioning the real motives behind the surprise deal. The new majority shareholder, UK-headquartered Petra Diamonds Limited, which has bought 75 per cent of the shares in the diamond mine from South African mining giant De Beers has declined to say exactly how much it plans to invest in the mine which has been posting cumulative losses for more than a decade. Petra will invest a substantial amount in Williamson over the next five years, but we cannot disclose details at this time, Cathy Malins, the Corporate Communications Manager of Petra Diamonds told THISDAY when asked to reveal the companys future investment plans in Tanzania. However, latest reports from South Africa suggested that Petra Diamonds Ltd has already budgeted $28m (approx. 33bn/-) to expand the diamond-mining operations at Mwadui in the next two years. The company announced this week that it had paid De Beers just $10m (approx. 12bn/-) for its 75 per cent stake in the diamond mine. The Tanzanian government owns the remaining 25 per cent of the shares in the mine. Petra believes that there is excellent potential to turnaround the economic performance of the Williamson mine. The key is to increase throughput to 7.5 million tonnes per annum (yielding some 500,000 carats per annum) and there is a two-year plan in place to do this, Malins told THISDAY. There remains a major resource at Williamson of 40 million carats. Given the lack of new discoveries in the diamond market, this is a significant deposit and it will sustain a mining operation at Williamson for many years to come. Asked if the company had any plans to buyout the governments minority shares in the diamond mine, she explained that: Petra looks forward to working with the (Tanzanian) government as its esteemed partner in the project going forward. There have not been any negotiations with regards to Petra buying the government�s stake in the mine. The Leader of the Official Opposition in the National Assembly and former chairman of the parliamentary Public Accounts Committee (PAC), Hamad Rashid Mohamed, said it was mind-boggling that De Beers was purportedly posting losses at the diamond mine for the past 14 years. Hamad Rashid, who led a PAC investigation into the diamond trade in Tanzania in 2004, said: They (De Beers) cannot claim to have been making losses all those years while involved in diamond mining activities in the country. He urged the government to tighten controls in the mining sector and ensure foreign investor companies do not under declare their actual revenues. Among other things, Hamad Rashids committee had probed the activities of the Tanzania Diamond Sorting Office (Tansort) and its London trading centre. The report findings indicated that the government was losing huge sums of money thanks to loopholes in monitoring the entire diamond mining activities and trading. The report noted with concern that the processing of diamonds before they were handed over to Tansort for sorting was entirely undertaken by Williamson Diamond Ltd. On his part the incumbent PAC chairman, John Cheyo, said yesterday he was shocked by the news of the sale of the diamond mine. Cheyo, who was also a member of the presidential mining sector review committee chaired by former Judge Mark Bomani, voiced concern that De Beers might have opted to sell its stake in the mine after reaping a hefty profit. Its quite possible that the company (De Beers) sold its shares after making a super profit from the diamond mine, he said, raising suspicion about the yearly losses posted by De Beers from its Mwadui operations. Likewise, the Karatu Member of Parliament, Dr Wilbrod Slaa, said the sale of the majority stake in the diamond mine was suspicious since De Beers had all along been claiming to be incurring heavy losses at Mwadui. He noted that the South African diamond miner had since 1994 been declaring losses to the government, hence let off from paying relevant taxes. The government has not shown seriousness in dealing with mining companies, particularly in the area of collection of royalties and other revenues that these companies are supposed to pay to the state, he said. Asked to comment about the sale of the diamond mine, Judge Bomani himself noted that there was nothing peculiar about the decision of De Beers to sell its stake in the diamond mine. The De Beers company is free to sell its shares, but it is supposed to make an official notification to the government on its decision to sell its shares since it was in a joint venture business, he said. Bomani said it was important for the government to ensure it collects stamp duty from the seller (De Beers) in the transaction regardless of whether or not the company had made a profit in its Tanzanian operations. Williamson mine, with a resource of 40-million carats, is a 70-year-old mine. De Beers returned to it in 1994, after 20 years. Last year the mine produced 220,209 carats, up from 189,396 carats, from 3.2-million tonnes of ore treated. De Beers decided last year an autogenous mill could lift throughput to 7-million tonnes a year, increasing diamond output to 500,000 carats a year and extending the mines life by 23 years. Petra Diamonds finance director David Abery was quoted as saying in South Africa yesterday that the autogenous mill was at Durban harbour and would cost about $5.5m to install. The companys technical director, Jim Davidson, said Petra planned to keep production to 1.8 million tonnes for the first six months to iron out bottlenecks and would increase this to 3 million tonnes for the next 18 months to produce 200,000 carats a year. The investor plans to process about 7.5 million tonnes a year of ore at the mine after two years.