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UPDATE 1-Petra Diamonds suspends Tanzania mine as govt seizes consignment

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Sept 11 (Reuters) – Petra Diamonds has halted operations at one of its mines in Tanzania after the government seized a consignment and questioned some of its personnel as part of a crackdown on the mining sector.

Shares in the London-listed company sank 25 percent in early trading, but by 0756 GMT had clawed back much of the losses to trade 6 percent lower at 84 pence.

The diamonds were seized at the main airport in Tanzania’s commercial capital Dar Es Salaam on Aug. 31 as they were being exported by Williamson Diamonds Ltd to Antwerp, Belgium.

The Tanzanian government said on Saturday it planned to nationalize the diamonds, whose value it put at $29.5 million, after it accused the miner of under-declaring its mineral exports.

Tanzanian President John Magufuli last week ordered a review of a Petra contract and asked public officials to resign over the outcome of an investigation into the mining sector.

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

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.

A parliamentary committee said on Thursday 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.

The mine is held 75 percent by Petra and 25 percent by the Tanzanian government. Operations at Williamson have temporarily been stopped for safety and security reasons, Petra said.

The company said it had not been told the reason for the action, adding that it conducted all operations related to the Williamson mine in a “transparent manner” and in full compliance with legislations.

Acacia Mining, majority owned by Barrick Gold Corp , said last week that it would stop underground work at its flagship Tanzanian gold mine and cut its production guidance in the face of a confrontation between the industry and the government. (Reporting by Arathy S Nair in Bengaluru; editing by John Stonestreet and Louise Heavens)