Zimbabwe to Slash Diamond Royalty to 10%

RAPAPORT... Zimbabwe plans to reduce the percentage of sales diamond miners must pay to the state, aiming to promote investment in more costly operations at the Marange fields.The government proposed a new royalty rate of 10% in theannual budget last week. Diamond producers currently pay 15% of gross revenues,but their overall costs have escalated as they shift toward hard-rock - or"conglomerate" - mining, which is lucrative but expensive.The change could benefit companies such as Russia'sAlrosa, which is exploring for rough in the country, as well as BotswanaDiamonds and Vast Resources, which operate a joint venture at the Marangefields."The royalty rate of 15% on diamonds was set during theperiod when mining was predominantly alluvial, and extraction cost wasrelatively low," Mthuli Ncube, minister of finance and economic development,explained in his budget statement. "However, diamond miners are [now] exploitingconglomerate deposits, hence the cost of extraction has significantlyincreased."Last year, the state-owned Zimbabwe Consolidated Diamond Company installed a crushing plant at Marange to help it process the harder rock. The nation plans to increase its annual production to 11 million carats by 2023, from 3.2 million carats in 2018, Reuters reported last month.  The state intends to introduce the lower royalty rate on January1 with the goal of attracting investment in exploration and extraction. Thecountry has also made progress in its plans to repeal an "indigenization" lawlimiting foreign ownership of diamond and platinum mines, Ncube continued.Image: A stone from Zimbabwe during Rough Diamond Week at the Israel Diamond Exchange in 2016. (Shutterstock)