Zimbabwe's Marange gem output to rise

* Zimbabwe set to become leading producer

* $2 bn annual revenues forecast

* Work begins at $20 million diamond processing facility

By Nelson Banya

MOUNT HAMPDEN, Zimbabwe, Aug 31 (Reuters) - Zimbabwe's diamond output from
its Marange fields will reach 40 million carats in the next three years,
with annual revenues expected at around $2 billion, a government adviser
said on Tuesday.

The government says it has stockpiled 4.5 million carats from its two joint
venture mines in Marange since January and that it sold its first stones
last month after approval from global diamond industry regulator, the
Kimberley Process (KP).

"With the new diamond find in Chiadzwa (Marange), we're estimated at 40
million carats per year and $2 billion per year in revenue," said Belgian
diamond expert Filip van Loere in an interview. He is advising the
government on ensuring compliance with the KP.

"Zimbabwe has been propelled to the number one spot as the world's most
important player and it will be number three in value. That is estimated to
come along within the next two to three years."

Zimbabwe's unity government, formed by President Robert Mugabe and Morgan
Tsvangirai, now prime minister, says it needs $10 billion to fix an economy
ravaged by hyperinflation, which peaked at 500 billion percent in December
2008.

Van Loere said Zimbabwe could surpass top diamond producers like Russia,
Botswana and South Africa, but said a sudden increase in output on the
global market could force prices down.

"The main issue for Zimbabwe is to be careful in harvesting this resource.
Zimbabwe might add 20 percent to global trade, but then prices will go down
at least 60-70 percent, so we have to be responsible, Zimbabwe should not
become the main producer just for the sake of it," van Loere said.

Zimbabwe's government has formed two joint venture firms -- Mbada Diamonds
and Canadile Miners -- with South African partners to mine the Marange
diamonds, but van Loere said there was scope for more mines in the vast
fields.

On Tuesday, Canadile Miners launched the construction of a $20 million
diamond processing and auction centre to the west of the capital Harare.

"Currently, the two mines occupy 10 percent of the total area. We need two
or three more firms in the area," said van Loere.

Over 30,000 illegal diggers descended on the Marange fields in 2006,
prompting the government to deploy the army to stop rampant panning and
smuggling.

Rights groups, however, accuse the security forces of committing atrocities
during the crackdown on the panners. (Editing by William Hardy)