By Nelson Banya

HARARE (Reuters) - Zimbabwe's government on Thursday 7 January halted the sale of diamonds from its controversial Marange fields, saying the process would only go ahead under international supervision.

State media had earlier quoted the chairman of a joint venture firm set up by the government and two South African companies as saying diamond auctions would start on Thursday 7 January, but a senior government official said the announcement was premature.

"There was no auction today, no sale of diamonds," Thankful Musukutwa, permanent secretary in the mines ministry, told reporters.

"The government observes and is committed to the administrative decision of the Kimberley Process Certification Scheme ... that all shipments from all production sites in the Marange area will be subject to examination and certification by a KPCS monitor."

Musukutwa said the government and the KPCS, which regulates the global diamond trade, were in the process of engaging a monitor to oversee the diamond sales.

"There will be no sales or exports of Marange diamonds until all government regulations and KPCS stipulations have been met."

Rights groups accuse security forces of committing widespread abuses to stop thousands of illegal diamond miners who descended upon the poorly secured fields in the eastern part of the country and have been pushing for a ban on Zimbabwean diamonds.

ZIMBABWE TOLD TO IMPROVE CONDITIONS

The KPCS voted last November to allow Zimbabwe to continue mining and trading in diamonds, but gave it six months to improve conditions in Marange.

The government, through mining arm Zimbabwe Mining Development Corporation, has partnered little-known South African companies, Core Mining and Grandwell Holdings, to set up Mbada Diamonds, a joint venture firm which is mining diamonds in Marange.

Mbada Diamonds chairman Robert Mhlanga told the state-controlled Herald newspaper that about 300,000 carats worth of diamonds would be auctioned in Harare on Thursday 7 January.

International diamond buyers from the Americas, Europe Asia and Africa would take part in the auction, he said.

The Zimbabwe government would earn up to 80 percent of the proceeds from the diamond sales, the Herald reported.

The Marange diamond fields are at the centre of a legal dispute between the Zimbabwe government and London-listed African Consolidated Resources (ACR), whose claims were cancelled by the authorities in 2006.

The government has ignored a High Court order, issued last September, to restore the Marange claims to ACR.

Other players in Zimbabwe's diamond mining industry are Rio Tinto, whose Murowa is the country's largest diamond mine, and the privately run River Ranch mine.