Petra Diamonds’ stock market value fell after the Tanzanian government seized a parcel of gems valued at nearly $15m (£11.4m) as part of a parliamentary investigation into alleged wrongdoing in the diamond sector.
The London-listed company also had to shut down its Williamson mine, the source of the stones, as “certain key personnel” were questioned by the Tanzanian authorities looking into how diamonds are being valued.
Shares in the company, which said it had not been made “formally aware” of the reason for the investigation, fell nearly 25% when the market opened, before recovering to settle at about 6% lower, down 6.2p at 83.75p.
The diamonds were confiscated at Dar es Salaam airport on 31 August as they were being readied for export to Antwerp, with Tanzanian officials claiming they had been undervalued.
“While Williamson Diamonds declared in its documentation that the value of the diamonds was $14.798m, a fresh valuation done by the government established that the actual value of the diamonds is $29.5m,” the finance ministry said in a statement.
“Among the legal action to be taken include the nationalisation of all the diamonds seized after it was established that there was cheating involved in declaring the actual value of the minerals.”
Tanzania has locked horns with several foreign mining companies since the 2015 election of John Magufuli, who as president has sought to extract higher value for the country’s raw materials.
His government last week cited “irregularities” in the process by which its stake in the Williamson mine was reduced from 50% to 25%, while Magufuli has also ordered an investigation into alleged under-declaration of diamond exports.
Petra said it had not been made formally aware of the reason for the investigation, although it produced several documents relating to the valuation process and royalty payments to the Tanzanian government.
The company said the 71,645-carat consignment had been given a provisional value of nearly $14.8m by Tanzania’s diamonds and gemstones valuation agency before being prepared for export.
Receipts for the royalty payments showed it paid nearly $888,000, as well as an “inspection and clearing” fee of nearly $150,000.
It said the final sum to be paid to the government was dependent on what it received from the sale of the gems in Antwerp, rather than the provisional valuation.
“The competitive open-tender process utilised by Petra is also used by several other diamond mining companies and has a proven track record of transparent price discovery,” the company said.
“Petra is committed to engagement with the government in order to resolve this matter and ensure that the correct information is available to all parties.
“The company will be in a position to address any other concerns raised by the findings of the parliamentary investigation once it has received a copy of the report.”
The company said mining operations “are conducted in a transparent manner and in full compliance with legislation in Tanzania and the Kimberley Process”.
“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.”