Rio Tinto has disposed of its stake in Murowa Diamonds and Sengwa Colliery Limited as the global resources giant exits the local mining sector.
BY BUSINESS REPORTER
In a notice on Friday, Rio Tinto said it had completed the sale of its 78% interest in Murowa Diamonds and 50% interest in Sengwa Colliery Ltd (Sengwa) to RZ Murowa Holdings Limited.
RioZim Limited owns the remaining 22% in Murowa and 50% in Sengwa and is set to assume overall management of both entities.
Rio Tinto said it was of a firm belief that the “future of these assets can be best managed by entities with existing interests in Zimbabwe”.
“Rio Tinto remains committed to the diamond industry and is focused on operating its two world-class underground mines while obtaining the approvals for its advanced diamond project in India,” said Rio Tinto diamonds and minerals chief executive Alan Davies.
In the first quarter of 2014, carats recovered at Murowa Diamonds were 40 000, down 42% from the same period in 2014.
Rio Tinto said the decline was a result of a planned plant shutdown to reconfigure the processing plant and a decision to reduce production rates pending confirmation that a new 15% export tax did not apply to Murowa.
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The government had put a 15% tax on diamond sales, but was forced to rethink in order to improve the viability of the mining industry.
Rio Tinto’s exit is a blow to Zimbabwe that is battling to attract foreign direct investment (FDI) to revive the economy that is showing economic stress.
Although FDI inflows into Zimbabwe increased to $545 million last year from $400 million in 2013, the figures still fell far behind most regional countries.
Latest statistics showed that FDI into Zimbabwe was due to investments in the mining, infrastructure and service sectors.
Analysts say investor-unfriendly policies such as the indigenisation legislation scare away potential investors. The indigenisation legislation stipulates that at least 51% of the business with a value of $500 000 should be in the hands of locals.
