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ZIMBABWE’S diamond revenues may rise 47 percent this year, indicating the country could have been “fleeced” from its previous diamond sales, a research report has said.

Diamond revenues were also lower in 2013 as leakages persisted in rough diamond sales.The country’s diamond revenues reached $466,9 million last year, a 38,4 percent drop from a year earlier, but dealers could have been buying Zimbabwe’s diamonds at a discount of up to 40 percent, according to a research by Equity Communications.

The firm is a provider of a comprehensive view of the global diamond industry value chain.

“Recent trial diamond tenders in Dubai and Antwerp confirmed what many already knew in the global diamond market – that the people of Zimbabwe were being fleeced in all their previous diamond sales,” said the report released yesterday.

“Scrupulous dealers who bought diamonds at tenders in Harare, via the Dubai route, had maintained that Zimbabwe diamonds could only be bought at hefty discounts of as much as 25-40 percent arguing that diamonds from the country came with serious reputational risks for traders.

The stakes couldn’t be higher for the Government of Zimbabwe.

“For the above reasons, diamond revenues are expected to increase 47 percent in 2014 and reach $686 million on the back of slightly increased production, vastly improved diamond sales and marketing methods plus continued plugging of revenue leaks.”

The Government is in the process of breaking down the sales system built in the last five years, to replace it with something that generates maximum revenue for the fiscus.

Zimbabwe has so far conducted two auctions at Antwerp, in December and in February, realizing $10,5 million from sales of 279 723 carats and $70 million from 959 931 carats.

The country also earned $29 million from its tender in Dubai and is planning a fourth auction at that exchange, Mines and Mining Development Minister Walter Chidhakwa said.

“Recent changes in the sales and marketing of Marange diamonds will result in diamond revenues for Zimbabwe growing towards US$1 billion in the coming years, provided Zimbabwe continues to access actual market prices,” said the report.”

Zimbabwe’s diamond production declined 26,1 percent last year to 8,911 million carats and will possibly remain in the nine million carats range in 2014, the report said.

While the research sees constant production levels, rough diamond prices are generally expected to increase by 11 percent in global markets because of long-term supply contract renewal cycles and improved consumer demand from China and India.

“Ultimately, the production footprint of the Marange diamonds is not prolific by world standards therefore Zimbabwe will have to boost production to at least 14 million carats per year if it wants to receive diamond revenues similar to those achieved by its neighbours. Such ambitions are still about 3 to 5 years in the future, and also highly depended on the approach Zimbabwe takes to develop its diamond industry henceforth.”

The Government is reviewing mining licences in the Marange diamonds fields and intends to reduce the number of operators by as many as five. The government will likely force through consolidation of the different operators to plug revenue gaps and leakages but consolidation is ultimately necessary for more sustainable mining operations.

“As things stand, Zimbabwe is still investigating the best way to consolidate the various operators in Marange. That’s the first step. If consolidation occurs, then the next step would be to stabilize and rationalise production in the concession areas.

“After that, the third step would be to optimize production and map out plans for underground mining. Finally, large capital investments would then be required to explore the underground operations. We are looking at 3 to 5 years of preparation,” said the report.

Because of limited external financial support, diamonds are becoming an important source of revenue for the Government, the report said adding Zimbabwe has to internally generate revenue required “to keep the country functioning.”

Government-owned Zimbabwe Mining Development Corporation jointly owns seven ventures in the Marange on a 50-50 percent shareholding basis.

Source : The Herald