In my ongoing research into the story behind the Kimberley Process allowing the sale of rough diamonds from the Marange region of Zimbabwe, an important background to the story is the role of ACR, their diamond concession and how they were thrown off the concession by the Zimbabwe Government. Below is the interview originally published in March 2010 on www.allafrica.com
31 March, 2010, Source: allafrica.com
Journalist Violet Gonda presents Hot Seat where she speaks to Andrew Cranswick, CEO of African Consolidated Resources, the company in the middle of a legal wrangle with the government over the Chiadzwa diamond mine. In this first part of the interview Cranswick talks about the history of, and the controversy behind, the Chiadzwa diamonds.
My guest on the programme Hot Seat is Andrew Cranswick, the CEO of African Consolidated Resources, the company which says has the legal title to mine the controversial Chiadzwa diamond claim. ACR was forced off the claim in Marange in Manicaland Province at gunpoint in 2006 and has been in the middle of a protracted ownership wrangle with the government ever since. Currently there’s a Parliamentary Committee hearing which has been set up to investigate operations at Chiadzwa in an effort to try and establish control of the alluvial fields where unknown quantities of gems are still being extracted. Welcome on the programme, Andrew.
Thank you Violet.
Now can you start by telling us your history of how you got involved with the Chiadzwa Diamonds?
Well African Consolidated Resources was a company founded in late 2003 by a bunch of Zimbabweans, black and white – who put their own money in to establish a company to explore for minerals in Zimbabwe . We, as exhorted by our President, we went off to find foreign investments to assist that programme after we had inquired a number of gold, nickel and metal projects. We raised funding in London and listed on the London Stock Exchange because that is a requirement for the foreign investment, so essentially we are a Zimbabwean company, founded by Zimbabweans but now listed in London so hence the common statement that it’s a British company.
We acquired a diamond exploration company that had been closed down by Delta Gold in the 1990s when they exited Zimbabwe and we acquired their database which was quite exhaustive. We also employed a number of people from the diamond industry who had a good knowledge, working knowledge of Zimbabwe and so diamonds became the fourth mineral that we incorporated into our portfolio. The find, like all exploration and mineral finds worldwide was a lucky one. It was found partially on good science, partially on prior information and at first we didn’t understand it because it’s a very unique geological deposit and when we did discover the actual existence of gem diamonds in that particular area – we had many, many hectares all around Zimbabwe exploring for many minerals – we immediately declared it as required by law through the Stock Exchange and we declared it to the Zimbabwean government, a public declaration. And we appealed for assistance to control some of the villagers who had started digging these diamonds up.
We got no assistance from the Mining Commissioner’s Office, the police were, the local police were at first very helpful but then they told us they had orders with which they were forced to kick us out. The government proceeded, well when I say the government I must clarify this because we are not in a fight with the government, there’s a couple of people in government that have vested interests that are trying to prevent a transparent mining of this deposit. But the Minister of the time had our claims cancelled or purportedly cancelled on very frivolous grounds saying that the ground had been under de Beers control – which de Beers denied.
Who was the Minister at the time?
Ambassador Midzi. Yes and so we refuted the claim that they had cancelled our mining rights and we took it to the Magistrate’s Court which immediately ruled in our favour but that ruling was ignored by the police and the Minister, so we then, and all this time we were lobbying government and offering a joint venture because it is an extraordinary deposit, a bit like the Botswana deposit and we felt it fair to share it with the local community and the country at large. And we offered that in writing consistently for the past four years but it seems that certain people wouldn’t want to joint venture with a company like ours which is transparent and auditable because perhaps the diamonds would be too visible and too track-able and therefore the money would not be able to go into certain pockets.
But then the new Minister Obert Mpofu came to power in the GNU in February 2009, we were very hopeful that we could strike a rational solution that would benefit all and he gave every indication in two meetings that he would treat this matter legally. He had advice from the Attorney General which clearly stated that ACR ’s rights were intact and should be respected, this is prior to the High Court decision and assured us that he would be working to resolve this amicably and we reiterated our willingness to join ventures with government and the local community and wrote to him to that effect. We wrote eight letters none of which were replied to over 2009 and then suddenly in July 2009 we discovered that agreements had been signed for mining ventures exactly on top of our mining claims, so the Minister had clearly no intention of rationalizing this for the good of the country and obeying the law at that time.
So we immediately took the matter to the High Court. Fortunately we managed to get the matter set down fairly quickly after July and on the 24 th of September the High Court heard the matter and there was a long hearing and clearly the Judge had read up thee facts incredibly well because the judgement that he gave was extremely detailed, very comprehensive and very aware of all the legal factors – and the South African advocates told me it was one of the best judgements they’ve seen in Africa ever. So that was all good and then of course, no-one has obeyed that Court ruling.
The Court ruling was to do what exactly?
The Court ruling had seven paragraphs, the most important paragraph was that the rights are and always were in possession and ownership of ACR , of African Consolidated and that we should be immediately returned to site to mine the deposit and that all diamonds ever mined from the deposit should be returned to us and most importantly was Paragraph Seven which said any notice (inaudible) in the Supreme Court will not serve to suspend the execution of this Order. In other words, the Order must be executed regardless of any appeal that might be lodged with the Supreme Court and the reason being that there was severe damage being inflicted on the country and on the deposit and on ACR ’s rights. Now the government, I must correct myself, not the government but ZMDC – the State-owned mining corporation with full approval of the Minister – continued to mine and we have evidence of that after that Court ruling. The South African companies by then were already on site, continue to mine in contempt of the Court ruling. So we appealed to the police to stop the mining – they did nothing. We wrote a letter to the Chief Commissioner of the police appealing for him to intervene and to give orders – nothing happened. We were prevented from entering site, the South African mining companies continued mining in contempt of Court.
Is this Mbada Diamonds and Canadile?
That’s correct, yes.
And what proof do you have to show that they continue to mine in contempt of the Court ruling?
They have declared they’re still mining, they said that it doesn’t apply to them because they weren’t a respondent in the case – yet their rights derive from ZMDC, so it’s nonsense. They are mining under ZMDC’s supposed title which has been invalidated so the Order ordering ZMDC to stop mining must surely also apply to ZMDC’s partners and no Court would argue with that. So it’s just a little public relations thing and yes there is proof, they’re declaring it openly and they’re flying diamonds, Mbada is flying diamonds to the airport every few days.
And of course the latest news says that the Kimberley Process has actually approved Mbada Diamonds to start selling its more than two million carat stash of diamonds mined from Chiadzwa and this is a report that appeared on the web site NewZimbabwe and basically they say that the certification ceremony will be set for the 29 th of March. Have you heard about this and what’s your reaction to this?
Well again it’s quite extraordinary if that is true. I can’t believe that is actually true, I think the source must be misinformed because – but let’s see the court case again in context because I haven’t told you the complete story. Just to get it 100% in the open and clear in case someone feels I’m not exposing all the facts. Chief Justice presided over the Supreme Court hearing to review the judgement, not as a major appeal but to review the High Court judgement, but especially the holding of the diamond and the mining and so on. And what he said was, pending the Appeal, that all diamonds that are mined should be lodged with the Reserve Bank in their vaults as a neutral party, not to be sold, to be stored pending the final Appeal, so he changed the High Court judgement on that point. He also changed the High Court judgement by saying that ACR must not necessarily go back on site until the end of the Appeal but the damage, the potential damage is enormous and therefore all mining should cease and it is so ordered forthwith. That was on the 16 February this year.
So not only were they mining in contempt for four months, in contempt of the High Court for four months, the Supreme Court ordered that all mining must cease and that was very, very clear, it didn’t require any respondents and they’ve continued mining since the 16 February so they are in contempt of the Chief Justice of the Supreme Court. These are foreign country companies operating in Zimbabwe in contempt of our Courts and the police and members of the government stand by and endorse it. It’s quite frightening.
Now if the Kimberley Process approve what has essentially been declared as stolen goods and essentially been ordered to the Reserve Bank vaults by the Supreme Court and that has not been obeyed, Kimberley Process approval of the sale of it, they are complicit in a crime in Zimbabwe.
I warned the Kimberley Process of this by writing to their Chairman and pointing out the legal facts, not threatening them but just pointing out the legal facts that it would not be in the Kimberley Process’s interests or good reputation to endorse a crime in a sovereign State. And the only answer they could give me was that the Kimberley Process doesn’t get involved in ownership issues. So what does the Kimberley Process get involved in, one must ask? Does there have to have been a war and have been how many thousands of deaths and how much bloodshed before the Kimberley Process can ban diamonds? If there’s no war, the stones can be stolen and the Kimberley Process will endorse it no problem, that’s what they’re saying. It’s quite a worry.
I was actually going to ask you about the Kimberley Process – this is a monitoring group that is supposed to monitoring activities in Chiadzwa, so do you think in general they are doing an effective job since they are monitoring activities in Marange?
Well it depends what they are monitoring. If they are monitoring whether there’s illegal digging and smuggling then it’s pretty easy. We have purchased on the open markets satellite pictures that clearly show that the area’s not fenced, that clearly shows that illegal diggings continue, so even if Mbada and Canadile claim that they were legal, they are not complying with the Kimberley Process because they haven’t fenced the area. There’s still a large quantity of illegal digging going on in that area and other areas which is very easy to control. We have proposed to the government and copied it to the Kimberley Process a very, very simple exercise of security that would secure the area. But the fundamental requirements are that title and ownership and respect for law have to be respected. It has to be sacrosanct if any law is going to be abided by.
And you asked me about the Kimberley Process, is the monitoring effective? Well it’s one chap based in Johannesburg, I’m sure he’s a very nice and competent guy but he has travelled to Zimbabwe I think as far as I know for a total of four or five days – at least as Kimberley Process monitor. He did not even meet ACR even though they’d undertaken to meet all stakeholders, he did not attempt to meet ACR ; he was flown to site by people who are basically obviously have a vested interest in approving a sale; he was escorted by the very people who are in contempt of the Supreme Court and he is one man – this is an area covering thousands and thousands of hectares. And he has not, as far as I’m aware gained any satellite information or any other information which we’ve offered and so how does he know if anything been complied to? I just don’t see it to be honest.
I know you mentioned this briefly earlier on but can you explain how you got your license as the government accuses you of getting it through bribes?
Let’s just, before I answer that question because it’s a good question, let’s clarify when we say ‘the government’. The government consists of a lot of individuals, many of whom we have high respect for, many of whom are very, very distressed by this absolute lack of respect for law and order and absolute lack of respect for the Courts. There are one or two individuals who clearly have a vested interest, either because if they are wrong they are found to be incompetent or perhaps they have some kind of beneficial interest. They are in government that want to ensure that we are kept off this, they will say absolutely everything and anything they can to discredit us.
Now allegations of bribery – well that’s interesting because, if that is the case why hasn’t the charge been laid for bribery against us? In our High Court defense, in defense of our High Court action, the various government bodies that were respondents tried to indicate improper pegging of our mining rights and we proved satisfactorily to the judge and a 100% satisfactorily to any independent opinion including the Attorney General’s own opinion himself that we did nothing whatsoever wrong, that we followed all due process in the pegging of our claim and the only thing that was not due process was the purported invalidation or cancellation by the mining officials, the ministry officials. So did we bribe someone? No, that’s a lie and anyone saying that is a liar.
So when did you get your license?
We pegged the mining claims using a prospecting license which is a standard procedure under law in Zimbabwe, there are several different types of exploration and prospecting licenses, one of which is you buy over the counter, it’s a green slip and it allows you to peg up to ten hectares as a mining claim once you discover an area that you think is interesting which is exactly what we did. And this is standard practice for all mining companies, all mineral companies in Zimbabwe , Australia , Canada , all the countries that use a very similar mining code. We have done it all over Zimbabwe from platinum, nickel, copper, gold etc rock phosphate and we have never had anything questioned. Everything that we did is exactly by the book.
You said you have mostly Zimbabweans in this company but the government has accused you of being a British company. Where is your company based?
OK that’s a fairly complicated question and obviously it’s a moving target – but the company is based in Harare , its Headquarters are in Harare and its registered office is in the UK , in Kent in England . But the original registered office for the Zimbabwean entity which pre-dates all other companies was in Harare , Zimbabwe . Founded 100% by black and white Zimbabweans and obviously if we are going to raise foreign investment, we have to sell shares – so it is no longer controlled by Zimbabweans, it’s no longer a majority of Zimbabwean company. I’d say Zimbabweans control about 30% but it’s the old story like the Deputy Prime Minister said – would you rather have 10% of an elephant or 100% of a rat? And the point is that to get foreign investment you must give foreign investors something back for their money and those foreign investors – we found the biggest appetite to be in Britain and the Stock Exchange most respected is the London Stock Exchange for this type of venture and so it was impossible for us to avoid listing in London.
So we did not apologise for the fact that we’ve now registered a company in England, that we’re now London listed, and that we now have international investors that combined control the majority of the company. But no single investor has more that 6.1% so no individual controls the company, and that includes me. The Minister recently said I control the company; ‘Cranswick that white man’. So it’s nonsense.
And you also mentioned earlier on that you have offered a joint venture with the government and the local community, now how do you respond to people who say that why didn’t you involve the locals before? Why now and is this not an attempt to win public opinion?
Firstly Violet, we did involve the locals from day one and if you speak to the Headman Chiadzwa, who is now the son of the late Headman and if you speak to the Chief Marange, and if you speak to the masvikiro there – Mr Masunzi, he is a wonderful man, he will tell you exactly what we did from day one with community relations and exactly what we promised them from day one. And that’s our standard approach – we have done the same in Ngezi, you can speak to Chief Ngezi, there the MP is Minister Webster Shamu. We have done absolutely all the right things by the community in every place that we operate. This is not a new thing; we offered that to the local community as standard practice.
What is not standard is offering a big chunk to government. Offering a big chunk to government – yes was partially to try and appease them in terms for their desire for income, there’s nothing wrong with that but this is an extraordinary deposit and like de Beers did in Botswana, we think that if you have an extraordinary deposit, this extraordinary because we didn’t know initially that it was this extraordinary – that’s the nature of mineral exploration and discovery – you never know what you’ve got until you’ve really sampled it and checked it out properly – but as soon as we did, we suggested that concept immediately to government and we’ve been totally ignored from day one. Now that’s conveniently covered up by the people in government who want to discredit us but we offered a much more transparent, far more favourable joint venture than they are currently getting. Not one dollar has reached the fiscus in four years from operation there. Not one dollar has reached the fiscus in four years of supposed government operation there – you tell me if that’s transparent?
Now the directors of the two firms, Mbada Investments and Canadile Mining, it’s reported that they recently told this Parliamentary Committee that’s probing corruption in Chiadzwa that they have not turned profit, blaming an order by the Supreme Court to halt all mining operations. What can you say about this? Do you buy this?
Well first of all we have affidavits to prove they have not halted mining and they’ve also told everyone they’ve not halted mining because they’ve continued to fly diamonds into the airport. The halt on diamond sales – let’s look at it in two ways: first of all Mbada are stockpiling diamonds at the airport where they claim to have lodged approximately two million carats. That’s all well and good, I personally suspect that a number of the diamonds that they’ve mined are not lodged at the airport and where they are, I don’t know. Are they declared within their company board minutes or are some individuals benefiting from those diamonds? I don’t know.
Canadile are processing 30 tonnes per hour of gravel and claim to have only produced 200 000 carats in nearly a year, in ten months of mining. Well in just a very hand organized sampling exercise over a few weeks, ACR collected 130 000 carats and there was a lot being taken out by the illegal panners who we were trying to stop and who the police would not assist us to stop and that is over a number of weeks. So how does Canadile operate for nearly a year and only produce 200 000 carats? It’s rubbish.
Their directors have been arrested holding diamonds. We have knowledge of a vast quantity of diamonds being sold daily across in Villa Manica in Chimoio, Mozambique. It’s too many diamonds to be coming from the illegal panners that are still operating in Marange and Chimanimani – so it must be coming from someone and I strongly suspect, in fact I directly accuse Canadile of smuggling most of their diamonds out.
What is the estimated value of the Marange diamonds claim?
We must be careful here because I’m under Stock Exchange rules so I’ve got to be very careful of what I say in terms of declaring a value of an asset if it has not been scientifically certified by an independent party – so just bearing that caveat in mind I’ll give you what I personally believe based on evidence that we’ve gathered both when we were on the ground and both on evidence that we’ve gathered of what ZMDC declared – and they didn’t declare much compared to what they were mining – and what Mbada’s declared and what we see trading across the border in Mozambique and sometimes trading in Harare and what’s on the market in Dubai and Israel that we know are Marange goods. So based on that, this could gross the country over a billion dollars a year in exports and that’s at the raw material value and in my opinion that is quite conservative.
Now if we develop a decent diamond polishing industry like we should, the likes of what India has got and it can’t be done overnight, it will take decades to develop to a size of India but one day we will be able to get there – then you can essentially double that because of the labour and effort and cost that go into cutting and then the mark-up value that comes.
Now if we were to produce more than a billion dollars worth of diamonds or more than a billion and a half it would probably start damaging the world diamond price, there are just too many diamonds at Marange so it’s a very sensitive issue for Zimbabwe and the diamond industry. There’s no point in killing the golden goose that lays the golden eggs, rather let him lay his golden eggs at his leisure and the Marange deposit belongs to the people of Zimbabwe, all minerals in Zimbabwe belong to the people of Zimbabwe – that’s what the Zimbabwean law says and the second sentence of the Mines and Minerals Act appoints the President as the custodian of the rights of the minerals on behalf of the Zimbabwe people. And then proceeds, we have a very, very good Mines and Minerals Act, and then proceeds to lay out in several hundred pages exactly how those mineral rights should be protected, respected, mined and enjoyed by the people of Zimbabwe and we have adhered to that 100% as we would do as a publicly-listed company.
But you know it is argued that most foreign investors, especially in the mining industry repatriate most of their profits and put very little back. How much did ACR pump back into Zimbabwe, into the Zimbabwean society as a result of the lucrative sale of diamonds?
Well let’s talk about ACR first. ACR has never sold a single mineral in Zimbabwe, not a single diamond, not a single ounce of gold yet. The cycle from exploration to discovery to resource development to feasibility to mining in most minerals is very long, it’s at least ten years. ACR has existed for just six and a half years and our first mining operation would have been Marange, our second would have been the gold dumps that are about to be processed late this year. Our big, big project, other than Marange such as platinum and nickel and the big gold project are at least another five years away from being mined. We’ve invested more than all of the exploration and mineral companies in Zimbabwe put together in the last six years. We have taken out not one cent, we employ 200-odd people, we give services to local industry, and we haven’t paid tax because we’ve never made a cent of profit because we’ve never exported anything. This is a long-term investment, it’s normally high risk, and it is high risk and the reward is when you find deposits and eventually mine them.
So ACR has never taken a single cent out so to say that we have not repatriated profits – we patriated 20, 30 million dollars in exploration to develop Zimbabwe’s future mining industry of which we expect to participate for a profit for our shareholders of course – that’s what business is all about.
So let’s talk about the mining sector in general – they say they take all their profits and don’t reinvest it – well the biggest mining company in Zimbabwe right now is Zimplats. To my knowledge they have reinvested every single cent of profit they have made in their ten years of their existence. Every single cent and that’s substantial money. In one month alone last year they made 50 million dollars, it is all going back into Zimbabwe. Now to make that 50 million dollars they have to pay tax of about 30 or 40 million dollars, they have to employ people for about 150 million dollars – employees, they have to buy services and diesel locally in the local economy for another 150 million dollars. So the profit that actually ends up one day paying a dividend after its all been reinvested, usually profits are reinvested for many years, the dividends paid out much later is a fair reflection on the risk taken by foreign investors to plough in foreign money.
This is not aid. Aid cripples a country, makes us beggars. Foreign investment makes us strong, provides employment. I do believe in the indigenisation so let’s get that clear, I do believe in the indigenisation, not in its current format but I do believe in it. I do believe that ultimately all these companies should be required or at least be encouraged to list on the Zimbabwe Stock Exchange to allow Zimbabweans to participate in a greater manner. I’m a great believer in that. I’m a Zimbabwean. I’m a fourth generation Zimbabwean, I’ve lived there all my life, I intend to live there for rest of my life, hopefully not in jail. So it’s nonsense that the mining companies come in to exploit at the detriment of Zimbabwe. Zimbabwe has no local capital to develop its mining. Foreign capital must be employed to do it. To do that we have to give them something back. It’s as simple as that. That’s what foreign investment is.
And we will continue with this discussion next week. In this final part, Andrew Cranswick will talk about the issue of corruption, the South African crooks who have been given permits by government to mine in Chiadzwa and his fears that the unrest created by these diamonds could lead to war as has happened so many times in Africa.