Diamond firm plans to sue Zimbabwean government over gem mining ban

Zimbabwe's Diamond Mining Company (DMC) plans to sue the government for breach of contract after the Southern African nation banned gem mining in the east of the country, a company official said on Wednesday.

Zimbabwe's mines minister on Monday ordered nine companies operating in the Marange fields to stop all mining activities and leave immediately because their licences had expired.

DMC general manager Ramzi Malik said that its joint venture contract stipulates that renewing licences was the responsibility of the government, through its state mining arm Zimbabwe Mining Development Corporation (ZMDC).

He said the investment agreements were valid and indefinite and therefore Harare was in breach.

Asked whether DMC would go to court if the government did not reconsider, Malik said: "I am sure we will."

"If you are removing the concession it means you are in breach," Malik said.

Any action by DMC could trigger similar moves by other mining firms, that could set them on a collision course with President Robert Mugabe's government, which has unnerved the industry with its policy to force foreign-owned mines to sell majority shares to locals.

DMC is a 50-50 joint venture between United Arab Emirates-registered Pure Diamonds and ZMDC.

Mines Minister Walter Chidhakwa could not be reached for immediate comment. He said on Monday that Harare's decision was not negotiable and police would be deployed to protect the mines. He added that the state was not nationalising the mines.

Malik, however, said that unknown people had on Monday night broken into the mine and stolen solar panels, generating batteries and office equipment, while fuel from generators and earthmoving equipment was drained.

"The value is in thousands of dollars. There is going to be a lot of loss, a lot," Malik said.

DMC was producing between 35,000 and 45,000 carats of diamonds each month, said Malik, who added that there were no diamond stocks at the mine when it was shut.

Officials from Mbada Diamonds and Chinese-run Anjin said on Wednesday that they were trying to persuade the government to reconsider.