Russia’s Alrosa finalises JV with ZCDC, to control 70% of diamond venture

The world’s largest diamond producer by output, Russia’s Alrosa, has finalised a joint venture with the Zimbabwe Consolidated Diamond Company (ZCDC) for the exploration of diamonds in the country.

A shareholder agreement and a JV establishment agreement were signed by Sergey Ivanov, Alrosa’s CEO, and Killian Ukama, Chairman of ZCDC.

According to the agreements, Alrosa will control 70% of the new joint venture, Alrosa Zimbabwe Limited JV, while the Zimbabwean state-owned diamond mining company gets 30%. The JV follows the MoU signed between the two companies in July.

“Signing current agreements allows us to form the company’s administration and to initiate procedures required to get necessary permissions and licenses. Getting authorisation and first prospecting special grants, JV will be ready to operate,” Ivanov said in a statement.

“Being a member of Responsible Jewellery Council, World Diamond Council and Diamond Producers Association, Alrosa complies in full with industry commitments on responsible business practices and its own corporate standards. Alrosa is committed to follow these principles strictly while working in the Republic of Zimbabwe.”

Alrosa had already established an affiliate company, Alrosa Zimbabwe Limited, in December 2018.

The JV will initially target prospecting in Chimanimani, on claims that were previously held by DTZ-Ozgeo, another Russian joint venture. The claims were ceded to ZCDC in 2018.

The JV plans to engage in geological exploration of greenfield deposits, before extending into diamond mining and the sale of rough diamonds. The company has applied for a number of greenfield licences.

Ambitious targets

Reflecting Zimbabwe’s lofty ambitions, Ukama, at the MoU signing, said the country hoped to grow output to 10 million carats by 2023. This would place the country among the world’s top five producers, an unlikely comeback for a country whose diamond output fell almost 75% over the past five years.

In 2018, Zimbabwe only produced 2.4 million carats. Hoping to attract new diamond investors, Zimbabwe announced a new diamond policy in 2018. The policy ended the State’s monopoly over diamond mining.

Alrosa has already committed US$12 million to the two-year exploration exercise, according to Vladimir Marchenko, Alrosa’s deputy chief executive in charge of Africa.

According to Rappaport, which tracks the diamond industry, Alrosa’s diamond sales reached $4.5 billion in 2018, after selling 36.6 million carats, making it the world’s leading producer. The company itself says it accounts for 27% of global rough diamond production in terms of carats.

Alrosa’s entry bolsters Russia’s presence in Zimbabwean mining. Russia is also in a joint venture, Great Dyke Investments, for the development of a platinum mine at Darwendale.