Shares in Petra Diamonds (LON:PDL) nosedived Monday after the company confirmed the Tanzanian government had seized a parcel of gems worth about $15 million, as part of an ongoing probe into alleged wrongdoing in the diamond and tanzanite sectors.
The company, known for some major recent findings, said it also had to halt operations at its Williamson mine, the source of the confiscated diamonds, as local authorities are questioning several of its “key personnel” about how diamonds are being valued.
Petra said it had not formally been told the reasons why its employees are being interrogated by the country’s authorities.
The diamond miner’s stock fell as much as 25% at the market open, and it was still trading low (-8.12%) to 82.65 pence at 1:42 PM London time.
Two government ministers were asked to resign last week after an investigation found irregularities in contracts surrounding the Williamson mine, which is 75% owned by Petra, with the government holding the remaining 25%.
The company noted that all diamonds produced at the mine are physically controlled by a number of different government representatives — in conjunction with Petra — from the point of recovery until the point of sale. This means, said the firm, that Tanzania has complete oversight of the diamonds mined at Williamson.
It added that the company is not responsible for provisional valuations of diamond parcels made before they are exported and published a number of certificates, invoices and receipts related to the blocked parcel on its website, in an effort to prove its diamonds have been handled appropriately.
The parcel from Williamson, containing about 71,000 carats in diamonds, was confiscated at Dar es Salaam airport on August 31 as they were being readied for export to Antwerp, with Tanzanian officials claiming they had been undervalued.
“While Williamson Diamonds declared in its documentation that the value of the diamonds was $14.798 million, a fresh valuation done by the government established that the actual value of the diamonds is $29.5 million,” the finance ministry said in a statement according to Arab News.
“Among the legal action to be taken include the nationalisation of all the diamonds seized after it was established that there was cheating involved in declaring the actual value of the minerals,” it said.
The allegations mirror a gold export probe launched by President John Magufuli earlier this year as part of a major overhaul of Tanzania’s mining industry. That investigation has taken such heavy toll on Barrick Gold-owned Acacia Mining (LON:ACA), that the company — one of Africa’s largest gold producers — decided last week to reduce operations in the country.
Mining contributes 3.5% to the gross domestic product of Tanzania, which is Africa’s fourth-largest gold producer. The government, however, wants to increase that piece of the pie by requesting more taxes from the sector. It has been on a drive to add value to its exports rather than send raw materials abroad.
Petra Diamonds also operates four mines in South Africa, including the iconic Cullinan, which has produced the two largest diamonds in the British Crown Jewels.