FILE - Miners dig for diamonds in Marange, eastern Zimbabwe. AP Photo/Tsvangirayi Mukwazhi-File

Harare – The Zimbabwe government has ordered seven diamond companies in the Marange area of eastern Zimbabwe to immediately stop all mining activities, a month after complaining about their opaque operations.

Mines and Mining Development Minister Walter Chidhakwa said the firms were operating illegally after the expiry of their joint-venture permits with the state.

“It has since come to our attention that the joint venture companies have been operating illegally, as the permits which had been granted expired and were not renewed over the last four to five years,” Chidhakwa announced in Harare on Monday.

He added: “This pertains to all the companies in the Marange area. In terms of conditions 6 and 8 of the special grant, the Secretary (of Mines) is empowered to cancel the special grant for various reasons including the economic interests of Zimbabwe.”

The drastic action comes a month after the Governor of the Reserve Bank of Zimbabwe, John Mangudya, complained about the non-transparent operations of the diamond mining companies.

Mangudya, lamenting the difficulties faced by the government in funding this year’s $4 billion national budget, said the authorities did not know the gem production volumes or what was being exported.

Minister Chidhakwa said the government had now formed the Zimbabwe Diamond Consolidated Company to exclusively mine the Marange area.

The new company was already recruiting personnel.

In one of the biggest mysteries of the global mining industry in recent years, Zimbabwe’s diamond-producing companies were recently declared technically insolvent.

Barely four years ago, experts from the World Diamond Council and the Kimberly Process Certification Scheme were unanimous in affirming that the Marange diamond fields in eastern Zimbabwe were the largest discovery in a century, with potential to account for 25 percent of global rough diamond supply.

The government, battered by economic turmoil which generated the highest inflation rate ever recorded in a peacetime country, trumpeted the diamond find as a marvellous boon, the magic wand to end poverty.

Today, the picture is not so rosy. The mining companies are broke, with a 2014 audit report submitted to Parliament by the Auditor-General Mildred Chiri revealing financial collapse, sky-high debts, opaque production data and general mismanagement.

Matters are not helped by the fact that the Marange basin has seen a depletion of easy-to-mine alluvial diamonds, and the companies are not attuned to mining deeper-lying agglomerate mineral, which requires huge financial outlays and expertise.

In 2013, the state-owned Zimbabwe Mining Development Corporation (ZMDC) projected that the Marange fields would produce 16,9 million carats, making the project “the single largest in the world in terms of carats produced annually”.

The country stood to earn upwards of US$2 billion per year, government officials claimed, and yet in 2012 the then Finance Minister Tendai Biti complained that only a measly US$19 million reached the state treasury.

Anjin Investments — a joint venture between the government-run ZMDC and China’s Anhui Foreign Economic Construction Group—boasted in 2011 that it had become the largest producer of rough diamonds on the planet. Four years down the line, Anjin’s real production statistics are shrouded in secrecy.

The Auditor-General’s report shows that virtually all the seven mining companies in Marange were now technically insolvent. Government has shareholding in all the firms.

Marange Resources Limited, owned 100 percent by the government, incurred a net loss of US$30,4 million in 2013 and US$1,4 million in 2014. Mbada Diamonds Limited, 50 percent owned by the government, posted an operating loss of US$49 million in 2013, with its current assets exceeding its current liabilities by US$89 million. In 2012, Mbada earned a profit of US$56 million.