HomeLocalDiamond saga: A case of deceit, fraud

Diamond saga: A case of deceit, fraud

DETAILS of why five senior Zimbabwe Mining Development Corporation (ZMDC) officials and the local representative of Core Mining and Mineral Resources were arrested this week emerged yesterday, shedding light on the swoop by police which has left executives in the corruption-ridden mining sector in shock.

Documents in the possession of the Zimbabwe Independent show that the ZMDC officials arrested were part of the company’s board select committee which comprised the then board chairperson (Gloria Mawarire), chairman of the finance and investment committee (Ashton Ndlovu), a member of the technical committee (Mark Tsomondo) and the chief executive officer (Dominic Mubayiwa). Suspended ZMDC company secretary to the board Tichaona Muhonde was also arrested.
Lovemore Kurotwi, the local representative of Core Mining and Mineral Resources and deputy chairman of Canadile, was also arrested. They are facing allegations of fraudulently entering into a joint venture mining deal with the state-owned ZMDC through dishonest means.
The ZMDC officials who were part of the board select committee were the ones who conducted due diligence on “approved strategic investors”, South Africa’s New Reclamation Group and Core Mining and Minerals, which later formed joint ventures with the state-owned mining company.
The joint venture companies which were controversially given diamond claims and mining licences in Chiadzwa in Marange district, Manicaland, were Condurango Investments, which traded as Mbada Diamonds, and Canadile.
Mbada is a joint venture between ZMDC’s subsidiary, Marange Resources, and New Reclamation Group’s Grandwell Holdings.
Documents show that Mubayiwa, Mawarire, Tsomondo, Muhonde and Ndlovu conducted a due diligence exercise on New Reclamation and Core Mining and Minerals from August 4-6 last year.
Mubayiwa, Mawarire, Tsomondo, Muhonde and Ndlovu, as well as Kurotwi were arrested for fraudulently using the Channel Islands-headquartered diversified natural resources company, BSG Resources Ltd’s name to obtain a contract on behalf of Core Mining and Minerals.
The six had claimed that Core Mining and Minerals, in which Kurotwi has 46,23%, was a subsidiary of BSG Resources Ltd when it was not. Kurotwi in turn had 23% in Canadile.
BSG Resources Ltd has offices in the Channel Islands, London and Johannesburg.
A senior government official said the fraud was “brazen” but had gone undetected all along. The Independent had since the beginning of the year been doggedly investigating this issue and the whole Chiadzwa diamond mining saga managing to unearth a series of irregularities and controversial arrangements surrounding the issue.
“The fraud started in March last year when Kurotwi approached Mines minister Mpofu saying BSGR wanted to mine diamonds in Marange. The minister was satisfied with BSGR’s credentials and then he referred the issue to Mubayiwa as chief executive of ZMDC,” a senior government official said yesterday. “Mubayiwa communicated a lot with Kurotwi over the issue and ended up recommending Core Mining and Mineral Resources under the guise that it was a special purpose vehicle for BSGR.”
The official added: “Two memoranda of agreements were prepared, one with BSGR as the guarantor and the other with Core Mining. BSGR’s guarantee was said to be US$2 billion. However, it was later realised that Core Mining was not a BSGR vehicle but Kurotwi’s company. Core Mining had no capital or equipment.
“It came to Zimbabwe with nothing and started borrowing money as Canadile from Agribank (US$1,5 million) for mining activities. In the end Kurotwi, as Core Mining’s main shareholder who was part of Canadile, started reaping dividends without putting anything on the table. This is where the problem is. ZMDC officials facilitated this fraud for reasons best known to themselves and Kurotwi was the beneficiary.”
The whole process was fraught with controversy and possible fraud. The ZMDC select committee had visited Core Mining offices in Kimberley, South Africa, on August 6 last year. They meet with Core mining directors and shareholders.
The ZMDC team’s report of the mission was revealing. It said they found the Core Mining team “not prepared for boardroom presentations to the select committee”. The excuse for the abortion of the presentation was that there was some “communication breakdown” as Core Mining thought the visit was only for “touring mining operations”.
Core Mining officials told ZMDC that they had a “principal domiciled in Israel and the principal was responsible for financing the entire project”.
“The Core Mining team emphasised that the principal’s name must remain confidential,” documents show.                 
While there, the ZMDC team failed to obtain adequate information on the project implementation matrix, corporate profile, directors and shareholders’ profiles, company registration documents, information on operations and other relevant information.  Documents show that it was clear to ZMDC officials that Core Mining was a dubious company, but all the same it was given a huge mining contract in Chiadzwa.
“This is where the problem is. ZMDC board select committee members either did not do their job or were paid to make misleading recommendations. Kurotwi was part and parcel of all this,” a government official said.  
Before they went to South Africa, ZMDC and New Reclamation, as well as Core Mining and Minerals, had signed memoranda of agreement in July last year for the exploration and exploitation of diamonds in Marange. The agreements were transitory for three months within which investors were to mobilise resources and equipment to fulfill conditions of the agreements.
ZMDC was expected to conduct a due diligence exercise to establish where new Reclamation and Core Mining had the capacity to mine the Chiadzwa diamonds.
As a result the ZMDC board select committee visited South Africa from August 4-6 last year. In carrying out the due diligence exercise the select committee relied on the evaluation guidelines which included financial capacity, technical capacity, management systems, business plan and understanding of the works required at Marange.
On August 4 last year, the ZMDC board select committee held a meeting with New Reclamation directors and shareholders at Sandton, Johannesburg.
However, the committee was very clear that New Reclamation, despite eventually entering into a huge mining deal with ZMDC, was not a mining house. It said the company is “not a mining house and is currently not involved in mining, let alone diamond mining”.
“Further, it has no diamond mining as part of its vision and growth strategy,” the committee said in recommendations to Mpofu last year. The committee said the only useful quality which New Reclamation had with regards to mining was that it had “enthusiasm to enter into diamond mining in partnership with ZMDC”.
During the visit no diamond mining equipment was viewed because it was not there, save for the company’s claims that it was going to mobilise the required equipment. So ZMDC had entered into a memorandum of agreement with a scrap metal company which did not even have mining equipment, let alone operations and experience.

 

Dumisani Muleya

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