Marange diamonds lose global shine

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THE Marange fields consist of widespread alluvial mining, where diamonds have been deposited on the earth’s surface and can be easily collected with rather light mining equipment, shovels, sieves and even bare hands. The mining at Marange contrasts with the worlds other large-scale diamond projects where commercial open-pit and underground mines require advanced engineering and state-of-the-art heavy equipment costing billions of dollars to build and operate.
Alluvial diamond projects tend to have a much shorter life span than open-pit or underground projects, as the resource is limited to the easily assessable surface stones, which can be produced rather easily and rapidly. While Marange is a relatively new project with formal mining only commencing 5 years ago, there are already indications that most of economic resource has been depleted.
The prospecting rights to Marange were initially held by a subsidiary of De Beers, which made a discovery in 2000, however the economics were too low for the company to pursue development and their prospecting order was left to expire in 2006. The prospecting rights were subsequently acquired by a group of Zimbabweans operating under a U.K. based mineral exploration company called Mining Development Corporation (MDC).
Months later, the Zimbabwe government nationalized the Marange property and forcibly took over control from MDC. Today, the diamond fields are operated under the government affiliate Zimbabwe Mining Development Corporation (ZMDC), which has partnership agreements with 7 private entities most of which are affiliated with Zimbabwe ex-military or political officials (see below).

Since mining under ZMDC officially commenced in 2008, the surface resource base has significantly declined resulting in a lower production grade requiring miners to move more or deeper tonnage to maintain current production levels. According to an anonymous source reported by the Zimbabwe Independent in November of last year, current surface grades at Marange are 3.75 carats per tonne.  A month later, Jinan Investments Ltd’s chief mining operations officer publically commented that deeper conglomerate rock grades drop to 0.4-0.5 carats per tonne, adding that they “are too expensive to extract.” Mining deeper conglomerate rock requires more advanced equipment, and some of the Marange companies are reluctant to put forth the capital expenditure necessary to procure the needed equipment.Advertisement

Some companies claim that upgrading equipment is not economically viable given that Marange diamonds are among the world’s least valuable on a per-carat basis. In addition to being relatively small, lower quality rough, Marange diamonds trade at a discount to the world market because of trade sanctions originating from alleged human rights violations.. The US, the largest diamond buyer in the world, does not allow the importation of Marange diamonds, and the European Union, home to the largest diamond trade hub in the world, Antwerp, had sanctions against Marange diamonds until recently.
During the chaotic transition period in 2006 when the ZMDC forcefully took control of the diamond fields from MDC, a lawless diamond rush erupted resulting in 200 deaths as 35,000 Zimbabweans were forcefully removed from the fields by the Zimbabwe military. There have been numerous additional documented reports of physical attacks and detentions by security officials working for ZMDC and the mining companies against local people accused of illegal artisanal mining.
Given the harsh socio-economic challenges of the country, a significant amount of the illegal mining can be explained by people acting out of sole desperation. Other violations include government sanctioned-forced relocation of Zimbabweans out of homes sitting on Marange land which resulted in loss of food sources and shelter as promised accommodations were not adequately provided.
Marange has been littered with cases of corrupt operating partners and government officials accepting bribes resulting in unscrupulous politics and tax evasion. The Finance minister has stated that the Treasury has not yet received any tax revenue from Marange operations in 2013.  In 2012, the then finance minister was forced to cut the country’s national budget from $4 billion to $3.4 billion after $600 million of expected Marange diamond tax revenue was never received.
The Kimberly process (KP), a United Nations-backed system that was enacted in 2003 aimed at halting the global trade of rough diamonds tied to violence has not been as effective as hoped in Zimbabwe.  [The governments participating in the Kimberly Process distribute rough diamond passports only to miners in their country that follow the principles of the KP, theoretically banning the export rough diamonds linked to violence].

Cheap  … Marange gems produced with relatively light equipment by industry standards