Rio Tinto exits Zimbabwe after selling diamond, coal mines

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(2015-06-29) Rio Tinto, the world’s second-largest mining company, is exiting Zimbabwe after selling its stakes in diamond and coal mines to its former local unit, RioZim.

The company sold its 78% stake in the Murowa diamond mine and 50% holding in the Sengwa colliery, it said Friday. The assets are best managed by a local company, Rio said, without disclosing the terms of the deal.

The Murowa diamond mine was valued at $279 million by Deutsche Bank AG in 2013. It produced 101,000 carats of gems in the fourth quarter of last year.

Rio told employees in Zimbabwe in January that high government taxes are “weighing down the business” to the point it may be forced to close Murowa, its sole diamond mine in the country. The southern African nation has raised taxes on everything from mines to water as it struggles to pay the public wage bill, which takes up 88 percent of the budget.

“Rio Tinto remains committed to the diamond industry and is focused on operating its two world-class underground mines whilst obtaining the approvals for its advanced diamond project in India,” Alan Davies, head of London-based Rio’s diamond and mineral unit, said in an e-mailed statement.

Pre-Emptive Rights

Mining is the biggest source of foreign exchange for Zimbabwe, which has the world’s largest platinum reserves after South Africa and also has chrome, gold and iron ore.

RioZim, based in the capital, Harare, said two years ago that it had “pre-emptive” rights to acquire Rio’s stake in Murowa. Zimbabwean law requires foreign-owned miners to sell or cede 51 percent of their shares to black Zimbabweans.

The departure of Rio follows the shutdown of as many as 800 companies in Zimbabwe last year, according to Finance Minister Patrick Chinamasa. Rio began extracting diamonds in 2004 after discovering the gems at Murowa in 1997.

Source: Money Web / Bloomberg

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