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Question marks on sale of Williamson Diamond Mines
2008-09-12 10:22:41
By Editor
Williamson Diamond Mines Ltd, which had been nationalized in 1996, was privatized in 1994, and a subsidiary of De Beers Group, Wilcroft Diamond Ltd, bought 75 percent shares from WDL and the government retained 25 percent.
At the time of privatisation in 1994, the State Mining Corporation (STAMICO) did not reveal how the new 75 percent shares sold to the investor were valued.
It has been revealed recently that De Beers Group has sold its controlling state in Williamson Diamond Mines based in Shinyanga to another strategic investor.
The strategic investor is a UK-based company with other mining interests in South Africa called Petra Diamonds. The price is $10m (12bn/-).
There are a lot of details which have not been revealed to the government and to the public at large. Among them is that no investment plan has been revealed for a company reported to have made commutative losses for the past 14 years and hefty diamond trading transaction in London where De Beers Group has a virtual monopoly of diamond trading in the West except perhaps for diamonds produced in Russia.
But there are reports that the new Investor Petra Diamonds will make an investment of $28m (Tsh 33 billion) over the next two years.
This is contrary to the statement by De Beers over a period of time that there are no new large diamond discoveries that have been made in the area.
Williamson Diamond Mines has sold to Petra Diamonds for $10 m (Tsh 12 billion) for 75 percent of the shares and there are no negotiations to buy the government stake of 25 percent in the diamond mine.
The Public Accounts Committee has been scrutinising the activities of both Wilcroft Diamond Company Ltd and Tanzania Diamond Sorting Office (TANSORT) in London.
The findings are that the value of the shares of WDM have been grossly undervalued and that huge losses have reported at (TANSORT) in London despite the brisk business in trading in diamonds.
As it has been pointed out appropriately by one Member of Parliament, the government should be stricter in monitoring the mining companies, both privately owned and privatised like WDL.
The MP may be right in saying that because Wilcroft`s revenue was not monitored and the company was probably not loss making and may have been making super profits.
If this is the case, then De Beers Group owes the government substantial taxes, remittances and even dividends as the government has a stake of 25 percent in the Diamond mining company.
The fact that Wilcroft Diamond Company was investing heavily in machinery and the presence of hefty trading pattern in London diamond market points to profitable operations.
There is a possibility of the undervaluing of diamonds at London market by the original investors.
It is therefore hard to believe that the De Beers Group has sold Williamson Diamond Mines simply because it is reviewing its portfolio and focusing on those with strategic potential.
It is revealed that in 2007 diamonds amounting to 220,209 carats were sold at $23 million.
De Beers appreciates that Mwadui is renowned for producing high value diamond and has rich and largest Kimberlite in the world.
We do not know how much the government knew about the operations of the Diamond Mine and how much it was involved in those negotiations for the transaction between De Beers and Petra Diamonds.
Be that as it may, there is a need for the government to monitor closely the operations of mining companies.
It should be involved in negotiations on the sale of privatised companies like Williamson Diamond Mines in which it has a stake.
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