Petra Diamonds shares fall 7% due to a diamond export block by Tanzania’s government. A parcel of diamonds destined for Antwerp, Belgium, was blocked for export to Petra’s Antwerp marketing office. According to a Petra spokesman, the South-East African country’s government has not formally given the company a reason for the block.
The government has apparently ordered the block for valuation reasons. Tanzania claims that the shipment value was $29.5 million and that its value has been’ under-declared’ by Petra. According to Petra, the government is responsible for the provisional valuation of pre-export diamonds. Therefore, the responsibility belongs to the Tanzanian government through its diamonds and gemstones valuation agency.
The Tanzanian government had stated at the weekend that it was to ‘nationalize’ the diamond parcel. The diamond operations of Petra in Tanzania are 25% owned by its government. The diamonds came from Petra’s Williamson mine, the most important diamond mine in Tanzania.
According to Petra, no grounds have been provided for this action by the Tanzanian government. The president of Tanzania, John Magufuli, is set on gaining more control over the country’s mining industry. He wants to boost the contribution of mining to the country’s economy. He has already increased mining taxes and seems set on getting hold of the diamond mines. His country is also involved in accusations against Acacia Mining, which he hit with a tax bill of $190 billion and accused of also misreporting export values.
According to local media in Tanzania, Petra has valued the 71,000-carat diamond parcel at $14.8 million – just half of what the Tanzanian government says it is worth. Petra has suspended operations of one of its mines in Tanzania on ‘health & safety and security’ grounds.
Tanzania recently passed new laws relating to mining taxes. However, it has also forced mining firms to renegotiate contracts to mine in the country. These actions appear to be just one step towards government control of diamond mining in Tanzania.
For many reasons, Acacia Mining is scaling back its mining operations in Tanzania, and Petra Diamonds may do the same. Mining accounts for 4% of the economy of Tanzania. This is not a sum easily regained should the mining companies leave. Meanwhile, share prices in these companies are falling. Petra shares are down 7.45% and Acacia mining down 4.3%