The mining giant Williamson Diamonds Ltd (WDL), the only private company that was allowed to operate in Tanzania when the county`s blue print for development was socialism and self-reliance, faces a bleak future. According to information availed to The Guardian on Sunday, the share partners of the cash strapped company for nearly 50 years - De Beers of South Africa and Tanzania Government - have failed to settle a total debt of $85 million. De Beers owns 75 per cent shares in WDL and the rest belongs to the Tanzania Government. The mine which is in Shinyanga region started operations in 1951 and had managed to produce 20million carats of diamonds by the end of last year. It has a capacity to produce 250,000 carats but there are fears it will be operating at a loss over the next 20 years. In a letter to the company dated July 22, this year William Ngeleja, Minister for Energy and Minerals, said financial analysis showed the company would be having a negative return until 2033, the time the mine`s official closure. The possibility of the company�s collapse arises amid a move taken by UK-based Petra Diamond to acquire the majority of shares in WDL early in September, at a cost of $10million. Details show the Government and De Beers Ltd had earlier agreed to find a strategic investor to rescue the mine, but the deal is now raising concern in the mining industry. Over the years the shareholders enjoyed periods of prosperity. More recently however they have endured a sustained period of operation and economic difficulties. De Beers says that since 1994 it has been operating the company with a loan account from wholly-owned De Beers� subsidiary, Willcroft Company Limited but it has been making losses. Debts burden The account started with an initial amount of $4.5 million in 1994, and rose to $ 85million at the end of April this year. Willcroft claim that the loan has never been paid, and for the most part interest has not been serviced. Over the decades, De Beers has continued with its claims that the WDL has been operating at a loss. This, according to documents made available to The Guardian on Sunday, is one of the burning issues. There are fears that the total debt will amount to $105million by the end of this year as the cash strapped mine continues to borrow. With the surging fuel prices plus other production costs, the mine has pegged its debt at $2million per month. Doomed deal?Despite the stumbling blocks, the UK based company has announced $10million takeover of the majority stakes in WDL. The takeover is a result of agreements reached by the two sides in May, this year. But the Tanzania Government is apparently unhappy about the takeover deal. Referring to it, a letter written by Ngeleja stated: ``We responded through our letter dated 22nd June, 2008 that the government had no objection in the idea, provided that it was in line with clause 6(1) of the 19th October, 1994 Shareholders Agreement.`` According to the minister, the agreement requires Willcroft to float its shares to the government prior to considering the same for sale to a new partner. The minister further said that after both parties held a meeting on July 21, 2008, the government was convinced that the new entrant was acquiring WDL business liabilities, adding that issues of contention between WDL`s shareholders (Willcroft and the government) would continue to be discussed in due course. On June 27, 2008, Willcroft Company Limited wrote to the Permanent Secretary, Ministry of Finance, Gray Mgonja requesting the government to accept the request to look for another loan to provide WDL with a working capital. In the letter, Willcroft stated that a number of major creditors were not paid, including Tanesco, due to capital constraints. The letter added that Tanesco disconnected the company�s power supply, forcing Willcroft to provide additional emergency funding of $ 2.5 million bringing the balance to $ 87.5 million as of June 15, 2008. The company proposed that, the shareholders obtain $ 20 million from the 1994 Willcroft 1 Loan Facility to enable the mine continue to operate. Ngeleja said the government had no objection to the request provided the shareholders entered into a separate agreement not related to the October 19, 1994 Shareholders Agreement that was still under discussion. The letter reads: ``We have noted the $ 20 million loan arrangement through a pro rata equity injection of both shareholders, that is $ 15 million for Willcroft Company Limited and $ 5 million for the Government of the United Republic of Tanzania, in which the government equity will be provided as a loan by Willcroft if the Government is unable to contribute.`` The Government also accepted the company`s proposition to temporarily suspend the requirements for WDL to pay interests on the entire balance of the Willcroft 1 Loan Facility. However, the Government maintained that regular interest payments should resume in accordance with the Willcroft 1 Loan Facility agreement once WDL became profitable and operation generated profit. The Minister requested Willcroft 1 Loan Facility to provide WDL with the $ 20 million loan in a new loan agreement that is separate from the conditions of the October 19,1994 Shareholders Agreement. The Government believes that this approach will protect it from a further liability, arising from the accumulated $ 85 million loan that hangs on the shareholders` shoulders in WDL. The government also insisted that the deal between Willcroft Company Limited and Petra Diamonds be considered as a takeover or a sale of the Willcroft Company to Petra Diamonds to avoid the selling of shares. The selling of shares option, in compliance with clause 6 (1) of the October19, 1994 Agreement before selling the 75 per cent Willcroft shares to a new partner, is a long process which may seal the opportunity to save the mine from closure. However, the government has refuted reports to sell WDL, saying that it would proceed with negotiations as provided for in the Shareholders` Agreement of October, 1994. The agreement says that the government must be given the first right of refusal in such cases. But a source who declined to be named said, it is the government which advised De Beers Group to take the option of Petra Diamonds takeover or buy off the Willcroft Company Limited. Doing so, will avoid the necessity of the right of refusal. The advice was given through a letter dated July, this year in which Mr Ngeleja acknowledged that the financial and operational state of the mine had been a going concern in the last decade. Sources said De Beers Group are among the mining giants championing a radical black economic empowerment in South Africa, which allows black Africans to join and benefit more in the mining industry. However, in Tanzania they are doing the opposite. ``Just recently they sold Williamson Diamond Mine (WDL), located at Maganzo, Shinyanga, at a cash consideration of $ 10 million to Petra Diamonds.`` Worse still, the transaction is done offshore, as a result of which the government will not even get stamp duty as Stamp Duty Act does not apply to offshore transactions, he added.