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By Avi Krawitz
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Posted: 04/29/10 12:08
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RAPAPORT... Throughout the ongoing controversy that has surrounded Zimbabwe’s Marange fields, it has been quite easy to put aside African Consolidated Resources’ (ACR) legal claim to the property. Frankly, it complicates an already complicated issue.
The Kimberley Process (KP) itself has been careful to avoid becoming entangled in “disputes between parties” as it works to fulfill its mandate to ensure that Zimbabwe meets the minimum requirements for KP membership. It has correctly argued that the legal issues at Marange do not impact the “conflict” nature of the diamonds culled from the field.
However, ACR’s claim has serious ethical implications, not only against Zimbabwe, but against potential buyers of these diamonds and the KP, should it allow Marange exports.
ACR has submitted an application to the High Court of Zimbabwe to stop any shipment of rough diamonds that were mined at Marange until the Supreme Court has determined the rightful owner of the fields. This week, the High Court dismissed the “urgent” nature of the application, but has yet to rule on the case.
The case serves as another chapter in the London-listed company’s turbulent history in Zimbabwe. ACR bought the fields from De Beers in March 2006, but was evicted in October of that year, after the government caught wind of the diamond riches that Marange contained. After the firm appealed its expulsion, in September 2009, the High Court upheld ACR’s right to the property. The government subsequently appealed that ruling at the Supreme Court, where the case remains today and, as ACR notes, “is unlikely to be heard for some time.”
According to a February 16, 2010 amendment to the High Court ruling, ACR reported that the court:
· Confirmed…that all diamonds acquired from the Marange claims area be surrendered to Zimbabwe’s Reserve Bank for safekeeping until the substantive appeal is finalized; and
· Allowed the Zimbabwe Mining Development Corporation (ZMDC) to remain on site, pending finalization of the appeal, but ordered that it cease all mining activities until a determination is made.
As ACR’s chief executive officer (CEO), Andrew Cranswick, stressed, “Neither of these instructions has been obeyed” since the government recruited Mbada Miners and Canadile Diamonds to partner with it in mining the fields. Their operations have helped grow the Marange stockpile to 2.7 million carats as of February 2010, according to KP monitor Abbey Chikane. Cranswick added that with the exception of the 129,031 carats mined by ACR, none of the diamonds mined at Marange are being held at the Reserve Bank.
Between October 2006 and February 2010, 4.4 million carats of diamonds were mined at the fields, of which 1.63 million carats were sold, Chikane reported.
As we stated in a previous editorial (“A Final Nail in the KP Coffin,” published on April 8, 2010), we expect Chikane to eventually clear the stockpile for exportation because that is his mandate. We also estimated that around 286,000 of those carats should be considered conflict diamonds, given the human rights abuses that have occurred at the Marange fields since 2006.
Cranswick rightly avoids being entangled in the KP issue, but has stressed that in accordance with the High Court decision, the full 4.4 million carats belong to ACR. He offered a stern warning to the trade that anyone who buys these goods should expect a lawsuit from the company and a criminal prosecution for dealing in stolen goods.
Our assessment is that ACR would be well within its rights to take these actions. Should the Marange diamonds be sold to the market, we can add the title of “stolen goods” to their long list of deficiencies. It could also raise questions regarding the KP’s role in facilitating the trade of stolen goods.
While the High Court said this week that the matter is not urgent enough to deal with now, the case further highlights the dire ethical consequences Marange presents the diamond industry. The matter is indeed urgent.
Note: This article is an excerpt from a market report that is sent to RapNet members on a weekly basis. To subscribe, go to www.rapnet.com or contact your local Rapaport office. The writer can be contacted at avi@diamonds.net.
Disclaimer
©Copyright 2009 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400. This Rapaport Market Report is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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