Tanzania's Bulldozer turns attention to Petra's diamond mine

After his bulldozing reforms to the gold mining sector, Tanzania's President John Magufuli has turned his attention to local diamond miners, calling for a review of Petra Diamonds' local mining contract.

On Thursday Magufuli ordered a review of Petra's contract over the Williamson diamond mine and ordered an investigation into allegations of under-declared diamond exports, mirroring the gold export probe that has beleaguered Petra's fellow FTSE 250 peer miner Acacia.

Overnight, a parliamentary investigative committee on diamonds and tanzanite mining accused the industry of being rife with corruption and tax evasion, with negligence by government officials causing losses of millions of dollars for the East African country.

Two reports on the diamond and tanzanite sector were submitted to Magufuli, with the president ordering the review and endorsed all the recommendations of the parliamentary committees in a live broadcast from Dar es Salaam.

In March, the government banned Acacia Mining from exporting its gold and copper concentrate exports as it accused the London-listed company of under-declaring its mineral content and for not paying enough tax, leading to the placing of one mine under care and maintenance earlier this week.

"Look out, Petra Diamonds," said Shore Capital mining analyst Yuen Low on Thursday morning.

"Apparently not satisfied with the havoc already wreaked on Tanzanian gold miners, press reports suggest that President John “The Bulldozer” Magufuli is now moving his crosshairs to the Tanzanian diamond sector – which, in practice, means Petra’s Williamson mine."

The Williamson open pit mine, which has been in operation since 1940, is Tanzania’s main diamond producer, based upon the 146-hectare Mwadui kimberlite pipe, which is the world’s largest economic kimberlite to have seen continuous mining.

Petra’s expansion plan for Williamson is expected to see tonnage throughput ramp up to about 5m tonnes per year from the 2018 financial year, which, at a grade of roughly seven carats per hundred tons, is expected to deliver circa 350,000 ctpa.

Petra’s current mine plan for Williamson has a life extending to 2033, but given that the Mwadui kimberlite hosts a major resource of 40.4mcts the company sees potential to extend the life of the mine considerably.

Shares in Petra, which unlike Acacia is not too reliant on Tanzania for its output, were down just over 1% to 89.95p on Thursday afternoon.