Petra Diamonds Ltd. halted production at its mine in Tanzania after the government seized a parcel of diamonds suspected of being undervalued, as a dispute between the state and foreign-owned mining companies widens. Petra shares fell the most in 16 years.
Employees of the Johannesburg-based company are cooperating with the authorities in the East African nation who are investigating a shipment of 71,654 carats of gems that was blocked from export to Petra’s offices in Antwerp, according to a statement released in London on Monday. Finance Minister Philip Mpango on Saturday threatened to nationalize the consignment after the government found the parcel of gems was worth more than the company said it was.
“Certain key personnel from Williamson are currently being questioned by the authorities,” according to the Petra statement. “Operations at Williamson have temporarily been stopped for health and safety and security reasons.”
Tanzanian President John Magufuli is overhauling the mining industry as the government targets doubling its contribution to gross domestic product to 10 percent by 2025. In March, he banned mineral exports and ordered an audit that found London-based Acacia Mining Plc understated the taxes it owes Tanzania, a finding the company refuted. The government in July approved laws that would enable the state to renegotiate contracts with mining and energy companies.
Petra shares fell as much as 28 percent on Monday morning, the biggest intraday plunge since June 2001. The shares were 16 percent lower by 8:19 a.m. in London. Petra said in its statement a government agency is responsible for valuing gem parcels that are exported to Antwerp, not the company.
Two Tanzanian ministers resigned last week after Magufuli told government officials suspected of wrongdoing in an investigation into the nation’s diamond- and Tanzanite-mining industries to step down. Edwin Ngonyani, a deputy minister of works, transport and communication, said he quit on Sept. 7. George Simbachawene, a minister in the office of the president in charge of regional administration and local government, announced his departure in a YouTube video.
Tanzanite, a blue gem, is only found in Tanzania. The nation also produces so-called “bubblegum” pink diamonds, including a 23-carat stone extracted from the Williamson mine, according to Petra’s website.
Report courtesy Bloomberg