The Sunday Mail
GOVERNMENT’S drive to derive meaningful benefits from diamond mining through the establishment of the Zimbabwe Consolidated Diamond Company is gathering momentum. The ZCDC management has been freshened up twice since February 2016 when the company was established. From January to April 2017, ZCDC produced 618 000 carats and is targeting an average of 200 000 carats for May and June. The Sunday Mail Business’s Africa Moyo sat down with ZCDC’s new CEO Dr Morris Mpofu to learn more about the company’s plans and challenges. The following are excerpts.
Q: What should Zimbabweans expect from ZCDC?
A: I come to ZCDC as substantive CEO with enthusiasm, passion and commitment for the job. I know that ZCDC is a micro-entity with macroeconomic bearings, and that there are great expectations from the shareholder and various stakeholders.
We should all understand that diamonds are a rich natural resource and their exploitation is expected to create significant value for the country. I do not under-estimate the mammoth responsibility I carry with this job.
It is not a misnomer that Zimbabweans expect the unlocking and realisation of significant value from this mineral.
As CEO, I am here to give strategic leadership and direction to the ZCDC establishment so that we attain Government’s vision of consolidating diamond mining in the country to achieve transparency and accountability.
The consolidation policy of Government, when executed with utmost proficiency and excellence – which is what we intend to do – will create significant resources for the country and its people.
In the immediate term, Zimbabweans should expect from ZCDC a complete re-orientation and re-design of its mining operations to develop and implement a mining business model that cost-effectively delivers to Government and the nation significant value for the fiscus and the communities where we mine.
ZCDC seeks support from all stakeholders. There is need for patience, confidence and trust.
Q: When we spoke almost six weeks ago, you said you were conducting a situational analysis. What are some of the critical findings of that situational analysis and how do you intend to address them?
A: I am glad to say we have completed the first phase of the diagnostics.
The exercise entailed associating undesirable process performance with management decisions concerning resources with the generic objectives of the diamond mining business.
The situational analysis was focused and comprehensive, and we may spend the whole day discussing the findings. However, I will share some of the critical insights.
Critical findings from the diagnostics were premised on the strategic thrusts of ZCDC as a consolidated outfit established by Government to ensure transparency and accountability in the mining of diamonds.
The key strategic thrusts I am referring to were born from the company’s inaugural strategic plan developed in 2016, and these include: the overarching operating tenet of adoption of best practice principles; consolidation of all individual mining entities into a singular Government-owned diamond mining concern; investing into exploration and evaluation; optimisation of mining and diamond recovery process; application of best practice technologies in engineering; an effective diamond value management model; mobilisation of capital to finance mining development; development of an effective product security and KPCS compliance; and consciousness of the community and human capital.
The diagnostic analytics gave me critical insights into establishing the current state of performance since establishment in 2016.
Some of the critical findings from the diagnostics include: a lot of legal challenges pertaining to acquisition and ownership of mining concessions by ZCDC; ZCDC’s lack of major funding from inception; and low capacity utilisation (below 30 percent) due to non-reliable ageing equipment that was inherited from the former mines, among others.
Regarding, what ZCDC intends to do to address the operational challenges coming out of the situational analysis, a robust diamond mining business model is being developed.
ZCDC’s business model is premised on a series of activities starting from confidence building to effective mining, processing and value management.
The confidence-building process involves structured and staggered intense ore-resource evaluation programme. This results in the confidence level increasing from an inferred resource (20 percent) to a measured resource (plus 85 percent).
Mine planning and development can then commence leading to ore extraction for subsequent efficient and effective recovery of diamonds.
The mining business model takes a staggered approach commencing with the immediate short-term (four–12 months), medium-term (12–36 months) and long-term (36–60 months).
The business model focuses on conglomerate mining and processing against the backdrop of alluvials running out in all concessions. In light of the declining alluvial reserves, focus will now be on processing conglomerate.
A simple business case scenario for conglomerate processing has been developed and financing has been secured to procure the requisite plant and machinery to commence conglomerate mining by August 2017.
In the mean-time, significant investment has been injected in intensive production geology (exploration mining) to create the necessary confidence and establish economic viability for mining development for conglomerate mining.
I will not as yet reveal our production targets until the geological surveys currently being conducted give us the confidence to do so.
The model also focuses on increasing diamond revenue by increasing operational effectiveness and productivity; organisational stability, business growth, and mining sustainability; business optimisation; containing costs of production and achieving maximum profit; and effective diamond value management.
It is important to note that the strategic thrust I have articulated has got its own critical success factors, top of which are cleaning up all legal outstandings and getting immediate capital from the shareholder.
I am happy to say that the ministers of Mines and Finance, and the Governor of the Reserve Bank, are working on an effective capitalisation framework.
Q: There have been a report of rampant abuse of diamond revenues in the past. How you plan to do things differently?
A: It is sad to note that since 2010, after a lot of mining that occurred at Chiadzwa by the former miners, there are these reports of rampant abuse of diamond revenue.
Taking from my previous occupation before joining ZCDC at the Reserve Bank of Zimbabwe, I had an aerial view of all the individual mining concessions at Chiadzwa.
We had great concerns on under-invoicing of diamond sales through tenders or other sale platforms. There were under-declaration cases that were continuously being investigated in collaboration with the National Economic Conduct of Inspectorate.
Government further instituted a forensic audit of former diamond mining companies at Chiadzwa and Chimanimani to establish the correctness of their diamond sales declarations.
In addition, there were concerns on the use of external parties in the tender system that did not benefit the country.
It is also saddening that when you visit the Chiadzwa fields, there is an expansive trail of mining and no environmental reclamation done by the previous miners, begging the question whether the mining model implemented then was of any benefit to the country.
However, we are glad that Government took a bold policy decision to consolidate the diamond mining operations in the country and mandated a wholly State-owned entity like ZCDC to ensure that there is total transparency and accountability in diamond production and marketing.
It should be understood that Government consolidated diamond mining concessions at Chiadzwa and granted ZCDC a composite Special Grant 6026 in terms of Part XIX of the Mines and Minerals Act (Chapter 21:05) on 22 February 2016. As such, Government did not consolidate the individual mining companies, but the concessions thereof.
Furthermore, pursuant to this noble national objective, and given the need to ensure that the country realises true and fair value from its diamonds, the tender system administered through external parties was discontinued.
Regarding how ZCDC plans to do things differently, let me advise that our business model has got elements of effective diamond value management, which will ensure the strategic preservation and realisation of true and fair value from our diamonds.
ZCDC is working on a framework with Treasury and the Reserve Bank that all diamond tenders conducted bring significant value to the fiscus.
Since March 2017, we have stopped the sale of small parcels and have now adopted a stock accumulation policy to ensure tenders bring meaningful value. In addition, ZCDC is re-orienting its diamond sorting and valuation framework to build new expertise to enhance existing skills in this regard.
Q: Reports suggest alluvial diamond deposits have run out at Chiadzwa. How far true are those claims?
A: The alluvial ore resource in Chiadzwa diamond fields was the prime target for most of the operating concessions since the start of operations in 2009. Alluvials had very low operating costs. At that time, minimum – if any – exploration was done due to abundance of alluvial resources.
As the ore resource from the rich areas was depleted, the operations started to invest in minimum exploration to sustain production. The exploration work that was engaged in was mainly exploration mining activity. Over the years the high grade alluvial ore was systematically depleted leaving behind marginal to low-grade material.
Q: Does ZCDC have plans to mine kimberlitic diamonds, and do you have the equipment for that?
A: Part of our business model entails implementation of a mining model that ensures business growth and mining sustainability in the medium to long-term. Mining sustainability involves prospecting, exploration and evaluation of diamond resources for the future, Diamonds for Tomorrow. ZCDC has engaged international consultants that are prospecting for kimberlites to come up with a feasibility report that is bankable.
Decisions on appropriate technology in the form of plant and equipment will be informed by the feasibility reports.
I would like to say that where we are now with the exploration programme – which started with targeting, using Ground Penetration Radar equipment, ground magnetics, intensive drilling and sampling, prospects for viable kimberlitic mining – looks positive.
Q: How much is ZCDC planning to invest in diamond mining this year? Have you have secured the funds, from where and what are the interest rates?
A: We thank the Reserve Bank of Zimbabwe, which has kept the company afloat by providing essential resources. This includes mobile mining equipment from Belarus, for which the first batch is expected in May 2017. The equipment will help capacitate ZCDC cut on prohibitive hiring costs.
The new business model which entails conglomerate mining also requires significant capital injection to purchase the requisite plant and machinery.
Capital expenditure is required for intensive exploration and evaluation of the ore resource, resuscitation of ZCDC’s machinery, procurement of state of the art mining and processing plant and machinery for conglomerate and investment into effective security management systems.
