Rio exits Zim as plans to merge gem firms take shape

Harare – Global resources firm Rio Tinto has exited Zimbabwe following controversial government plans to merge all diamond mining companies in the country into a state-owned corporation in which the government will have a 50% interest.

Rio Tinto announced on Friday afternoon that it has completed disposal of its 78% stake in Murowa Diamond Mine in Zimbabwe to RioZim, its former unit in the country which has diversified interests spanning coal, gold and diamonds.

RioZim controlled the other 22% stake previously not held by Rio Tinto.

In the run-up to to the announcement, Mines and Mining Development Minister Walter Chidhakwa had said he was forging ahead with the merging of all diamond mining companies in Zimbabwe. He said the merged company will be licensed to undertake all diamond mining in the country.

He also previously admitted that managing the diamond mining industry in Zimbabwe was proving problematic, as some of the mining companies were resisting the controversial decision.

Financial details of the disposal have not been made available but Seeking Alpha said on Friday that Deusche Bank valued Murowa mine at $279m in 2013. During the last quarter of its past year, the Murowa mine produced 101 000 carats.

Rio Tinto’s decision, which it hinted at early this year after controversy over an export levy on unrefined diamonds, has now been seen by fund managers and economists as a response to the regulatory framework in Zimbabwe.

“It has been coming, since the confusion over export levies and the decision to merge Murowa into a state-owned company where the state will own half the shares was always going to have such consequences.

"Rio’s exit from Zimbabwe is a reflection of how difficult it is to continue operating in Zimbabwe,” said an executive with an international resource fund management company.

Rio Tinto has also disposed of its 50% interest in Sengwa Colliery in Zimbabwe, explaining that it was hopeful that “the future of these assets can be best managed by entities with existing interests” in Zimbabwe.

After the disposal of its interests in Zimbabwe, Rio Tinto said it will focus on operating two major underground properties. It is now also closer to obtaining approval for a diamond project in India.

“Rio Tinto remains committed to the diamond industry and is focused on operating its two world class underground mines whilst obtaining the approval for its advanced diamond project in India,” said Alan Davies, chief executive for diamonds and minerals at Rio Tinto.