Economy

Petra Diamonds shares drop as Tanzania continues sector crackdown

Petra Diamonds shares drop as Tanzania continues sector crackdown”

On Friday, Tanzanian police chief said they have started investigating senior officials implicated in the two reports by parliamentary investigative committees on diamonds and tanzanite mining.

Diamonds have no centralised price so calculating the overall value of that parcel is tricky, and appears to be the main reason the parcel has been blocked.

"Williamson Diamonds documents give these diamonds a value of $14.7 million (pre-market) while the actual value is $29.5 million", the Finance Ministry said in a release Saturday.

"The UK-listed firm said the mine had been "temporarily shut" for "... health and safety and security reasons" whilst some of its key personnel responded to questions by "authorities".

Tanzanian President John Magufuli is overhauling the mining industry as the government targets doubling its contribution to gross domestic product to 10 percent by 2025.

As a result of the news that first emerged over the weekend, and was confirmed on Monday, shares in Petra are tanking, dropping as much as 27% in the first few minutes of trading.

"The government has complete oversight of the diamonds produced at the mine, which are physically controlled by a number of different government representatives in conjunction with Petra from the point of recovery until the point of sale", the miner said.

PETRAShares in the FTSE 250 firm fell 5¼p to 84¾p
PETRAShares in the FTSE 250 firm fell 5¼p to 84¾p

The provisional valuation is used to calculate the company's provisional royalty payments to the government, however adjustments to final royalty payments based on the actual sales proceeds for the diamonds, once sold in Antwerp, are then made at the end of the tender process.

Petra has also suspended operations at one of its mines in Tanzania.

Shares in the company, which said it had not been made "formally aware" of the reason for the investigation, fell almost 25% when the market opened, before recovering to settle around 6% lower, down 6.2p at 83.75p.

It added it would provide an update "in due course".

Petra is not the first mining company to run into trouble with the authorities in Tanzania.

The president's actions are a continuation of a crackdown in a mining sector that accounts for about 4 percent of Tanzania's gross domestic product.

Last week, Acacia said it was scaling back operations in Tanzania.



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