×

UPDATE 4-Tanzania orders review of Petra Diamonds contract in mining crackdown

crackdown@

* Petra shares fall as much as 3.5 pct

* Petra says all business transparent, compliant

* Parliament reports show corruption in mining sector - PM (Adds minister's resignation, updates shares)

DAR ES SALAAM, Sept 7 (Reuters) - Tanzanian President John Magufuli has ordered a review of a Petra Diamonds Ltd contract and asked senior public officials to resign over the outcome of an investigation into the mining sector, he said on Thursday.

One minister quit his post as requested, state-run television reported.

The moves are the latest attempt by Magufuli to tighten control over the mining industry to boost government revenues and stamp out alleged corruption.

"I have endorsed all the recommendations of the parliamentary probe committees for the review of the Williamson diamond mine contract," Magufuli said in a televised broadcast.

London-listed Petra has a 75 percent stake in the mine, while the government owns the rest. The company's shares fell as much as 3.5 percent, but had trimmed losses to trade down 1 percent at 90 pence by 1516 GMT.

Petra said in a statement that its business was conducted in a transparent manner and that it had complied with all legislation in Tanzania. The mine accounted for 18 percent of Petra's revenue last year.

A parliamentary committee said there were "gross irregularities" in the manner in which the Tanzanian government diluted its shareholding in Williamson from an initial 50 percent to the current 25 percent.

In his televised broadcast, Magufuli named three senior public officials he had asked to resign ahead of investigations against them.

State-run television broadcaster TBC1 said that one of them, George Simbachawene, the Minister of State in the President's Office, had relinquished his post.

Simbachawene served as energy and minerals minister between 2014 and 2015. He and other officials could not immediately be reached for comment.

Magufuli also said he had ordered law enforcement agencies to investigate allegations of under-declared diamond exports.

CRACKDOWN

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.

Magufuli has sent shockwaves through the mining industry in Africa's fourth-largest gold producer since his election late in 2015 with actions he says are aimed at ensuring that mining companies pay a fair share of taxes.

Tanzania has passed new laws to increase mining taxes, to force companies to renegotiate their contracts and to allow the state to own up to 50 percent of shares in mining companies.

In March it banned exports of copper concentrate or mineral sand for processing abroad.

"It seems like it's open season on all the miners in Tanzania right now," said Investec analyst Hunter Hillcoat.

Acacia Mining said on Monday that it had stopped underground work at its flagship gold mine and cut annual production guidance because of the ban.

Magufuli also instructed law enforcement agencies to investigate allegations of tax evasion and corruption in diamond and tanzanite mining.

Another parliamentary committee that investigated tanzanite mining said there was massive smuggling of the purple-blue gemstone.

Tanzania, the world's only source of tanzanite, banned exports of the raw gemstone from April 2010.

The parliamentary committee said its investigation revealed Tanzania had received only 5.2 percent of revenues from global tanzanite trade over the past decade.

"It's unacceptable that we have been getting just 5.2 percent of tanzanite revenues as a nation ... this is shameful," Magufuli said.

"I am instructing our law enforcement agencies to swiftly investigate all these allegations contained in these reports against these public officials ... we cannot be truly independent if our natural resources are being plundered."

Tanzania's Prime Minister Kassim Majaliwa said the parliamentary reports exposed "massive looting and corruption" in the country's mining sector.

Magufuli fired his mining minister and the chief of the state-run mineral audit agency in May after the release of another audit into possible undeclared exports by mining companies to evade tax, at the time targeting gold. (Reporting by Fumbuka Ng'wanakilala in Dar Es Salaam, Maggie Fick in Nairobi and Zandi Shabalala in Johannesburg; Editing by Dale Hudson, Mark Potter and David Goodman)