New diamond mining strategy could benefit mining communities in Sierra Leone

Sierra Leone Telegraph: 22 April 2019:

A group of 29 international diamantaires and jewellers, headed by Martin Rapaport – Chairman of the Rapaport Group, were in Sierra Leone a few weeks ago on a trade visit.

They held discussions with the Bio led government about a new strategy that could transform the lives of diamond mining communities in the country, and make it easier for local miners to sell their finds to the government.

Sierra Leone is natural resource rich but yet one of the poorest countries in the world, with less than 50% of the adult population expected to live beyond their 50th birthday due to poor healthcare and abject poverty.

Corruption, poor governance and lack of strong political leadership, have seriously damaged Sierra Leone’s potential to become one of the richest countries in Africa.

Diamond mining has the potential to transform the lives of people living in communities in and around the areas where the gem is mined. But, there has to be a change in government policy and strategy.

For far too long, successive governments have abdicated their development responsibilities in those communities, with very little return by way of taxation revenue from the mining companies.

But all of this is about to change, if a proposal submitted to the government by one of the world’s leading diamond processing merchants – the Rapaport Group is accepted by the Bio led SLPP government.

This is the proposal signed by Martin Rapaport, the chairman of the Rapaport Group:

Rapaport Proposal to the Government of Sierra Leone Regarding the Artisanal Diamond Mining SectorMarch 31, 2019

This Rapaport Group proposal provides Sierra Leone’s artisanal diamond sector with a systematic and sustainable business model that will optimize the benefit of Sierra Leone’s alluvial diamonds for the diggers, their communities and the government.

Strategy

Artisanal diggers will be given an opportunity to sell the diamonds they find through a legitimate government channel. Government diamond revenue will then provide vital infrastructure to the communities where the diamonds are found.

A virtuous cycle whereby digger communities obtain benefit will encourage diggers to sell their diamonds through legitimate channels. The more diamonds sold through the government, the more benefits to the community, and therefore the more diamonds sold through the government.

A system of local, public, weekly, transparent, competitive, fair-market-value auctions will be held in the Kono District. This will ensure that the diggers and the government get fair market value for their diamonds. The auctions will be open to all sellers, including licensed and unlicensed diggers. Bidding will be restricted to licensed dealers and exporters.

Proposal

This proposal is based on section 167, subsection 5 of the Sierra Leone Mines and Minerals Act 2009:

(1) Any person who finds any precious mineral in a mining area shall forthwith deliver such precious mineral to the holder of the mineral right in respect of that area.

(2) Where the holder of the mineral right referred to in subsection (1) is unidentifiable or cannot be found, the finder of the precious mineral shall forthwith surrender the precious mineral to the Director or a duly authorised officer, but in any event not later than seventy two hours after finding the precious mineral.

(3) Any person who finds any precious mineral in or on any land which is not the subject of a mineral right, the finder shall forthwith report to the Director and surrender the precious mineral but in any event not later than seventy two hours after finding the precious mineral.

(4) Any person who fails to comply with any of the provisions of subsections (1), (2) and (3) shall be presumed to be in unlawful possession of precious minerals and unless the contrary is proved, shall be proceeded against and punished in accordance with this Act.

(5) A finder of a precious mineral who complies with the provisions of this section shall be entitled to forty percent of the value of the precious mineral and shall be presumed to be in lawful possession of the precious mineral.

The law calls for the “person who finds any precious mineral” (subject to conditions 1, 2 and 3) to deliver that mineral to the government and says the finder shall be “entitled to forty percent of the value of the precious mineral.”

This proposal calls for the establishment of a diamond auction center in Koidu, Kono district, whereby unlicensed artisanal diamond diggers (“finders”) will deliver the diamonds they find to a “government receiver,” who will then supervise a weekly transparent and competitive public auction where the diamonds may be sold to the highest bidder. The auctions will be held every Thursday to ensure reasonable cash flow to smaller artisanal diggers.

Benefits of local, public, weekly, transparent, competitive, fair-market-value auctions

  1. The transparent and competitive weekly auctions will provide fair-market-value prices and revenue to the government and the diggers. The auctions will eliminate charges of unfair pricing for artisanal diggers.
  2. The auctions will provide the highest level of price discovery and transparency, as all stakeholders (including the government and diggers) will be able to examine the quality of the diamonds being sold and observe the highest bid prices they attract.
  3. The public auctions will be broadcast over the internet, enabling local, national and foreign buyers to bid online in real time.
  4. The weekly auctions will provide a consistent cash flow to the artisanal sector every Thursday. This cash flow will support a strong microeconomic grassroots multiplier effect that will encourage economic development and expansion in the district.
  5. The weekly auction frequency will provide a fair market for small artisanal diggers who cannot delay the sale of their diamonds due to their urgent need for money to provide basic necessities for themselves and their families.

Requirements

  1. The law requires that 60% of the value of the diamonds be given to the government. There should be a provision ensuring that 25% of the 60% (i.e., 15% of the value of the diamonds) goes to the communities where the diamonds were found. Furthermore, the 40% given to the diggers should be tax-free.

Such benefits to the community will ensure there is incentive for the diggers to bring their diamonds to the government. Our model for this arrangement is based on the sale of the 709-carat Peace Diamond.

  1. The law requires that the diamonds be delivered to a “duly authorized officer.” Rapaport proposes a transparent system whereby the “finder” is properly identified, the diamonds are properly secured, the diamonds are made available for viewing, and a live auction is held.
  2. Rapaport proposes to act as the auctioneer of the diamonds and will charge a 3% seller commission that will be deducted from the auction sales price.
  3. Unlicensed diggers will submit their diamonds to the “Government Agent,” who will then submit the diamonds for auction. Once they are sold, the auctioneer will pay the auction sales amount minus the 3% auction fee, with 60% going to the government and 40% going to the “finder” digger.
  4. All licensed sellers shall have an opportunity to participate in the auction. Participation in the auction is entirely voluntary. In the case of sales by licensed entities, the government may require that a percentage of the auction sale result be collected as taxes.
  5. The government shall be responsible for the security of the diamonds until such time as they are delivered to the buyer, and ensure that the diamonds offered for sale are available for public viewing. The government may elect to deliver the diamonds to the auctioneer who will manage the viewing. In such an event, the government will pay all insurance and security costs.
  6. Rapaport will encourage the participation of international bidders in the auction by marketing the diamond to international buyers, broadcasting the auction over the internet, and encouraging independent experts to view the diamonds and communicate their quality to buyers.

In some instances, computerized analysis and digital imaging of the diamonds will be made publicly available online. International bidders can be represented by any Sierra Leone bidders who will assume the responsibility of making cash payment and exporting the diamonds to the international buyers.

  1. Rapaport, as the auctioneer, will have the right to represent foreign bidders, subject to the condition that it takes full responsibility for making cash payment and exporting the diamonds to the international buyers. Rapaport will charge international buyers a buyers’ fee that will be above and in addition to the auction sales price.
  2. In the event that diamonds are sold to international buyers, the government may immediately deduct all relevant taxes from the auction sale amount.
  3. The government or any other seller may decide not to accept bids below a minimum bid price.
  4. Absent a publicly disclosed reserve price, the government may decide not to sell a diamond lot if the auction price does not meet the government’s estimates. The decision to accept or reject the auction sales price must be made by 5 p.m. the day after the auction so bidders may be properly notified.

Conclusion

This proposal is made with the hope that it will create substantial benefit for the artisanal community.  The program when successful should be extended to other areas.

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