Reclamation, Zimbabwe Plan Gem Mine on Atrocity Site

By Carli Lourens and Brian Latham

Nov. 5 (Bloomberg) -- New Reclamation Group Ltd. plans to form a venture with Zimbabwe to mine diamonds from a deposit that human rights groups have said has been the site of military atrocities, a copy of the agreement shows.

New Reclamation, a Johannesburg scrap metal company part owned by Old Mutual Plc, will manage mining on the deposit through its at least 50 percent owned Grandwell Holdings Ltd. in partnership with Marange Resources Ltd., a unit of the state-owned Zimbabwe Mining Development Corp. Two members of the decision making body of President Robert Mugabe’s political party confirmed the terms of the agreement, declining to be identified because it is confidential.

Marange, as the deposit is known, was seized by the government from Maidstone, England-based African Consolidated Resources Plc in 2006 after gems were found. As many as 20,000 illegal miners besieged the area, also known as Chiadzwa, and were later cleared off by the army and police. New York-based Human Rights Watch says more than 200 were killed last year. Zimbabwe’s police say they have had no reports of atrocities. New Reclamation and Zimbabwe’s mines minister didn’t return calls.

“Marange wishes to strategically partner with Grandwell, which shall provide funding” to help mine and market diamonds, according to the July 21 agreement, which is signed by New Reclamation, ZMDC, Grandwell and Marange.

The Zimbabwe High Court on Sept. 24 confirmed the title of African Consolidated to claims on the field. The U.K. company has said it is seeking the return of its concession.

‘Preparing to Mine’

“Reclamation is preparing to mine in our concession area,” Andrew Cranswick, the chief executive officer of African Consolidated, said in a phone interview from Zimbabwe. “They’re preparing to start mining next week.”

The area allocated to New Reclamation overlaps with African Consolidated’s claim, he added.

The Kimberley Process, a global body created to curb trade in gems mined to fund conflict, considered whether to suspend Zimbabwe as a member after a mission visited the Southern African country in May, when it investigated claims of diamond smuggling and related violence from Marange. It decided today to keep Zimbabwe as a member and support its program to work toward compliance with the group’s rules.

“Zimbabwe has had more than enough time to put a halt to the human rights abuses and smuggling at Chiadzwa,” Tiseke Kasambala, Africa researcher with Human Rights Watch said in a phone interview from Johannesburg. “The situation there cannot be allowed to continue any longer.”

Investors Deterred

Grandwell, registered in Mauritius, will provide as much as $100 million toward mining the deposit, the agreement states, adding that the shareholders of Reclamation will need to approve the project.

New Reclamation’s Chief Executive Officer Michael Movsas, through his personal assistant, declined to speak to Bloomberg News and was said to be unavailable when subsequent calls were made. Calls to the office and mobile phones of Obert Mpofu, Zimbabwe’s mines minister, weren’t answered while four calls to ZMDC didn’t connect.

Lynn Bolin, a Cape Town-based spokeswoman for Old Mutual, which owns 5.28 percent of New Reclamation, referred questions back to the company.

New Reclamation, southern Africa’s biggest scrap metal company, sold 253 million euros ($375 million) of bonds due in 2013 in January 2006. It processes ferrous and non-ferrous metal as well as glass, plastic and paper waste and employs more than 2,000 people according to its Web site.

‘Law Must be Upheld’

Zimbabwe, which is trying to recover from a decade-long recession, is trying to attract foreign investment even as a dispute between Mugabe’s Zimbabwe African National Union- Patriotic Front and the Movement for Democratic Change threatens to dismantle a coalition government set up in February deters investors.

“We have said before that a full independent investigation is needed and that the law must be upheld,” Nelson Chamisa, an MDC spokesman, said in a phone interview from Harare today. “The mining claims, like any dispute, must be resolved and upheld by the country’s courts.”

To contact the reporters on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net. Brian Latham in Durban, South Africa at blatham@bloomberg.net.

Last Updated: November 5, 2009 11:11 EST