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Marange tenders taking off in a big way
Diamond Intelligence Briefs
February 01, 2012

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It was two am here in Washington DC, yesterday when a phone call from Harare made me jump - and I knew the night was over. A Belgian trader said that he is attending a rough tender by the Diamond Mining Company (DMC), which is currently tendering some 472,000crats. DMC is a reincarnation of what was once called Pure Diamonds - the name of an associated diamond trading company in Dubai. It is a joint venture with the government-owned Zimbabwe Mining Development Company (ZMDC).

Another KP-Compliant Mine?

The trader posed an urgent question regarding the mine's KP compliance: DMC people claim that they will have a Kimberley Process Certification Scheme (KP) certificate no later than February 7th - the closing date of the tender - and they are selling now so that they can get their revenue stream started right away.

I dropped a line to Stéphanie Chardon, the Chair of the KP's Working Group on Monitoring (WGM), asking him if there is another KP-compliant mine in Marange that we don't know about. His answer was "yes" - there is.

"The KP Monitors visited DMC and found it to be compliant," said Chardon. "This was discussed by WGM on 26 January and no objections were raised, so it seems to be 'kosher'. The KP Monitors were scheduled to conduct another visit on the occasion of the firs export," he added, thus confirming the report by the trader that Monitor Abbey Chikane would be there this week.

DMC claims that it have been mining for some five months; its relatively modest alluvial mining operation produces some 7,000 carats per day, which at US$50/PC would be worth an estimated us$350,000. That's about US$130,000,000 a year. That's at least another 2.5 million carats of predominantly cheaper goods entering the diamond business on the supply side - assuming that this level of production is maintained. That's probably a wrong assumption, as the output will be more as mechanical capacity is enhanced and improved. DMC is managed by VIC Botha and Gile Sithole. There is considerable involvement of Indians and Lebanese.

A level playing field

The hardly noticed entry of DMC into the industry as a KP-compliant mine raises a number of questions. Though one might argue that Marange has ceased to be an issue, that it has become just a matter of routine and that there is no need to announce such entry to the industry at large, one might also argue to the contrary. Single and Specific mine certification remains an oddity and is quite contrary to the way the KP system works, where only countries are considered compliant or not compliant, and "new mines" are therefore neither KP-related nor noticeable events.

But we see it as a matter of maintaining a level playing field - of fair competition. How can one compete in a Marange Tender if there hasn't been any public notice of the KP approval of another mine?

The Chinese owned Anjin mine will sell some 500 000 carats and Marange Resources will sell some 350,000 carats. Mbada is also having a sale, but I am not aware of how much they are offering, though I would assume that it wouldn't be less than 400,000 carats.

Not all sales will need KP certificates, as in Harare there are ostensibly a few diamond manufacturing units employing some 50 cutters altogether. This doesn't mean that the goods aren't exported, but we wouldn't know.

My back-of-the-envelope calculations show 1.65 -1.7 million carats for sale in the next weeks. At US$50 p/c. that is "too much" money (US$85million to US$90 million), but only 10 percent of these carats will be gem quality, and the rest will be cheaper goods for which there is presently little appetite. Both DMC and Anjin sell from inventories accumulated over periods when they were denied KP certificates. Prices are bound to be under enormous pressures - with a spill over effect on the rest of the diamond market. More on this later.

Courier Companies

As we reported previously, none of the usual courier companies (BRINKS, Malca-Amit, etc.) will take good in Harare - because these Marange Mines are under US OFAC sanctions against Zimbabwe. DMC may not be listed (yet) per se, but it's 50% shareholder, ZMDC, is - and that's enough for sanctions to apply.

Therefore, each and every buyer has developed his own "transportation arrangement" - mostly by passenger on the Ethiopian Airline's convenient (but nightmarish in terms of seating comfort) (Harare - Tel Aviv flights. The majority of parcels would be boarded in Johannesburg. OFAC or no OFAC, the rough diamonds do go out- and the resultant polished finds its way to the United States, or more precisely, mostly to the United States, which is the preferred destination for most of the world's cheap diamond production. (From a diamond perspective it is our best "junk market.")

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