Jul 17, 2019

ALROSA’s JV with Zimbabwe’s ZCDC Will Have an Impact on the Country’s Diamond Mining Sector

In a major development, ALROSA yesterday announced the signing of a joint venture agreement with Zimbabwe’s national diamond miner Zimbabwe Consolidated Diamond Company (ZCDC), to develop diamond deposits in Zimbabwe.

The agreement was signed by ALROSA Deputy CEO Vladimir Marchenko and ZCDC Non-Executive Board Chairman Killian Ukama. The President of the Republic of Zimbabwe Emmerson Mnangagwa and ALROSA CEO Sergey Ivanov attended the signing ceremony.

“According to the terms of the agreement, ALROSA gets a 70% controlling stake for the development of greenfield projects, ZCDC – 30%,” ALROSA stated. “First of all, the joint venture will be engaged in geological exploration of greenfield deposits. Further objectives of cooperation ― diamond mining and independent sale of rough diamonds in external markets.”

In that sense, though the initial first step will be exploration, the agreement has the potential to have a far-reaching impact.

Moreover, under the JV, ALROSA will have access to not only areas where ZCDC holds the licenses presently; but will also be able to work in territories across the entire country. “In case a new prospective area is discovered, the company will contact directly the Zimbabwe Ministry of Mines and Mining Development requesting a new license for this area,” ALROSA explained.

ALROSA has also categorically made the following statement in its press release announcing the JV: “ALROSA operates in strict compliance with corporate standards and industry commitments as part of membership in RJC, WDC and DPA. All these standards will be unconditionally implemented in the work of ALROSA in Zimbabwe. ALROSA has never, under no circumstances considered, and does not consider the possibility of entering the Marange region.”

ALROSA Deputy CEO Vladimir Marchenko commented: “Creation of a joint venture is a major step in the cooperation with our partners in Zimbabwe. We are committed to productive work in the exploration of new promising areas and subsequent diamond mining. Our specialists have been working in Zimbabwe for more than three months now, and the national authorities have been of great support to them. We have chosen various projects for the joint venture, and part of them is to be launched this autumn. Of the existing fields for development, we are preliminarily considering the areas located in the Chimanimani region.”

ALROSA had established an affiliate company in Zimbabwe, ALROSA (ZIMBABWE) Limited in December 2018 itself. The reason for forming this company was to implement projects in mineral prospecting, exploration and mining operations “with a view to creating joint diamond-mining and other mining enterprises”, ALROSA explained.

Media reports out of Africa, based on an interaction with ALROSA CEO Sergey Ivanov say that the Russian mining giant will be investing US$ 12 million for diamond exploration, in the first phase.

"We are hoping that exploration will start in September. We see a lot of potential and we will invest more in the coming years depending on the outcome of the exploration," Ivanov is quoted as saying by BusinessDay.

The publication also reported Zimbabwe’s Mines and Mining Development Minister Winston Chitando as saying that “there was a lot of scope for investment”.

"This is a joint venture between ALROSA and the ZCDC,” he is quoted as saying at the agreement signing event. “It will look at greenfield and brownfield projects. So there will be exploration in new areas that are not known to have diamonds and there will also be work in areas such as Marange and Chimanimani which are known to have diamonds."

He is reported to have added: "This is part of our vision to produce 10-million carats annually and to earn $1bn every year from diamonds.”

Meanwhile, NewsdzeZimbabwe, another publication, reported that ALROSA had already paid an advance of US$ 1.6 million for the “operationalisation” of the joint venture, and committed to putting in more monies for mining development and for buying equipment. 

It will be recalled that the President of Zimbabwe had visited Russia in January of this year where he had broached the topic of funding for the diamond sector.

But apart from funds, ALROSA’s joint operations with ZCDC will add much “value” – notably in intangible ways -- to Zimbabwe and its diamond sector.

While there has been much and continuing controversy about the manner in which the country was handling the diamond mining business as well as about diamond mining in that country, ALROSA is an organised player with an impeccable reputation on many fronts, including in labour and social welfare, business standards and transparency and other such matters.

It is likely that the JV will help put the Zimbabwean diamond sector on a much more organised level and instil various business values, standards and operating systems   which have become essential for all major companies in the world today. This will also help Zimbabwe to realise more widespread acceptability and much better value for its diamonds in the long run.