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Govt ‘disowns’ new diamonds investor

KILASA MTAMBALIKE
Daily News; Friday,October 03, 2008 @00:02

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The government has clarified that a 75 per cent stake in the Williamson Diamonds Limited (WDL) mine still remains with Messrs Willcroft, a subsidiary of De Beers - effectively refuting recent assertions that the shares had been acquired by another firm, Messrs Petra Diamonds.

Energy and Minerals Minister William Ngeleja said in Dar es Salaam yesterday that the government wasn’t given the right to first refusal before Messrs Willcroft sold off its shares to a new investor. According to a 1994 binding agreement between the government and the De Beers subsidiary, the first partner (Willcroft) should have first given the government the opportunity to acquire the 75 per cent of its shares – at the cost of $10m.

Only after failure by the government to acquire the shares would Messrs Willcroft be free to float their shares for public sale, the minister clarified. “Clause 6.1 of the agreement between the government and Willcroft stipulates that before the latter sells its shares, it should give the government the right of first refusal … only when the government fails to buy them should they be sold off at the market price,” he said.

Willcroft is a subsidiary of Cheviot Holdings Limited which is owned by De Beers Societe Anonyme of South Africa. In 1994, the government sold off 25 per cent of its shares to Willcroft, retaining a 75 per cent stake in the WDL located in Kishapu district of Shinyanga region. Prior to that, the government and Willcroft had a 50-50 ownership of the mine.

According to Mr Ngeleja, the government formed a sectoral committee to discuss the fate of WDL in March this year following the mine’s worsening financial problems, at which the Wilcroft deal was discussed, among other items. He further said that again in May this year while discussions were ongoing, Willcroft presented a proposal to sell off its 75 per cent stake in the mine to another investor.

“In June, we responded to their proposal … saying that in principle the government had no objections to such a transaction – only if it observed Clause 6.1 of the 1994 agreement,” he reiterated. Mr Ngeleja added that in July De Beers informed the government that it was in discussions with Petra Diamonds to sell off Willcroft along with all its investment portfolio of 75 per cent shares in the WDL.

In September, the entire outfit making up Willcroft was reportedly sold off to Petra Diamonds of Britain – along with Willcroft’s 75 per cent shares in WDL. However, Mr Ngeleja said that selling off of Willcroft to Petra did not directly mean that the 75 per cent shares in WDL had been sold off as well. “What happened is that Willcroft as a subsidiary of De Beers is the one that had been sold off to Petra Diamonds, not its 75 per cent shares in WDL,” he noted.

He further said that the government would not delay its decision on whether or not to buy the 75 per cent shares from Willcroft, and expressed hope that the decision would be reached before year-end if all procedures will have been met by then. Willcroft Group Manager Tony Guthrie said the WDL mine in Shinyanga needs substantial capital investment for it to become viable.

Mr Guthrie said that the decision to sell the 75 per cent shares was reached after it was agreed that the mine did not ‘fit the profile of De Beers.’ “Williamson has some very serious problems that need to be fixed soon…it is a low-grade mine in the sense that there are ‘very few diamond yields’ from every ton of ore extracted,” he said. He said that it was not easy to determine the exact amount of capital investment needed to revitalize the mine, but hinted that the $10m price tag covered only the Willcroft shares, not the whole of WDL as an entity.

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