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Gold/Mining/Energy : SOUTHERNERA (t.SUF) -- Ignore unavailable to you. Want to Upgrade?

To: DavidA who wrote (3029)	4/23/1999 12:40:00 AM
From: DavidA	Read Replies (1) \| Respond to of 7235

Maduna to announce new diamond plan MUNGO SOGGOT, Johannesburg \| Thursday 3.30pm. THE Minister of Minerals and Energy, Penuell Maduna, is expected to announce on Friday the preliminary results of the government's snap probe into the way diamonds are evaluated. It is understood that Maduna has been advised that diamonds being exported from South Africa should be valued at market-related prices, and not at the value attached to them by diamond giant De Beers. Such an announcement would boil down to a challenge to the "price book" which De Beers uses to run its diamond cartel. These prices are set by De Beers' London-based marketing arm, the Central Selling Organisation. The director general of the Department of Minerals and Energy, Sandile Nogxina, confirmed the investigating team included officials from the South African Revenue Services (SARS) and Customs and Excise. Despite the inclusion of the SARS officials, joining the finance department's chief tax policy director, De Beers chairman Nicky Oppenheimer this week played down the significance of the probe, saying there were "no tax implications" for the diamond giant. The team was appointed by Maduna last week after an unprecedented decision by the government's diamond valuator to reject De Beers' evaluation of a consignment of diamonds due for its London marketing arm. The new government diamond valuator, which vets diamond export prices, said the gems were significantly more valuable than the price suggested by De Beers. The valuator's move is consistent with a government strategy to address the way De Beers has operated in South Africa and find ways to resuscitate the local diamond cutting industry. De Beers initially wanted to challenge the validity of the valuator's contract, but backed down after the meeting where it was agreed Maduna would appoint a task team to resolve the deadlock by Friday. Nogxina said the team would be offering some "short term solutions" initially, but needed about another month to resolve longer term problems. Oppenheimer told Reuters this week that the government probe had no tax implications because De Beers does not pay export duty on diamonds. The export tax exemption to which Oppenheimer referred is granted to De Beers in terms of an agreement with the government which obliges De Beers to give local diamond cutters first choice on diamonds suitable for the local industry before they are exported to De Beers' Central Selling Organisation in London. In return, De Beers gets its tax exemption. In practice a committee appointed by the Diamond Board selects the diamonds suitable for the local industry. Then all De Beers' diamonds are shipped to the CSO in London and De Beers brings back to South Africa, carat for carat, the type of diamonds desired by the local industry. It is up to De Beers to monitor this process, which is understood to be an area of concern for some state diamond officials. Diamond analysts said this week that by confining the tax implications of the probe to export duties, Oppenheimer was ignoring other tax implications stemming from the prices at which diamonds are valued - most obvious being the taxable profits of De Beers mines. De Beers' argument is that it is difficult to challenge its pricing policy because it claims it is effectively the diamond market. Some officials believe De Beers has set up an operating environment that often supports its worldwide diamond cartel at the expense of the local industry and the government. ie: SUF will most likely prosper with such change ... We may not initially see any increase in prices, however it looks favorable in that it will occur. This was obviously not a coincident in having selected the parcel of diamonds (Jan/99) from the Marsfontain, in effort to conduct such study.