There is an old adage attributed to St Ambrose that says when in Rome, do as the Romans do.
This axiom, which simply means behave as those around do, appears to resonate well with what the global miner Rio Tinto went through in Mongolia and Zimbabwe recently.
The British-Australian miner recently bought another 3.7 million shares of Ivanhoe pushing its stake in the Vancouver-based gold and copper miner to 49 per cent.
Ivanhoe owned a 66 per cent in the Oyu Tolgoi project, in Mongolia while the remaining 34 per cent belonged to the Mongolian government.
The project was currently half complete, and would produce its first ore next year and commercial production of copper, gold and silver concentrate in the first half of 2013.
"The acquisition of Ivanhoe shares was made in compliance with existing contractual arrangements between Rio Tinto and Ivanhoe Mines that permit share purchases in certain circumstances and subject to certain limits," it said in a statement.
"Under the terms of these agreements and subject to certain exceptions, Rio Tinto's current maximum permitted shareholding in Ivanhoe Mines is 49 per cent."
The transaction involved a private share purchase that cost Rio Tinto over C$73 million ($71 million).
Rio Tinto agreed to jointly fund the Oyu Tolgoi project in 2006, which saw Mongolian lawmakers voting three years later to phase out a windfall profits tax in 2011.
This move removed the last obstacle to a deal with Rio Tinto and Ivanhoe Mines to develop the mine, which was expected to produce 1.2 billion pounds of copper and 650,000 ounces of gold per year in the first decade of operation.
However, despite raising its stake in Ivanhoe, which indirectly gave much control in the Mongolian Oyu Tolgoi project, Rio Tinto did the opposite in Zimbabwe, as it sought to comply with the country’s empowerment law that demands foreign mining firms transfer 51 percent shares in their local operations to black investors.
The firm was said to have surrendered a 51 percent stake in its diamond unit Murowa.
"Murowa Diamonds wrote to us saying they have given up 51 percent of shares and these would be given to our people," Indigenisation and Empowerment Minister Saviour Kasukuwere was quoted as saying by state media.
Rio Tinto had a 78 percent stake in Murowa, while the remaining 22 per cent interest was owned by Riozim, an independent Zimbabwean owned and listed company.
Company officials had not made a public comment either agreeing or denying the statement made by Kasukuwere.
Murowa produces about 250,000 carats per annum but Rio Tinto said earlier in the year that the operation had potential to expand six to seven times its current production levels.
Small scale operation started at Murowa in 2004 after the discovery of three kimberlite pipes in 1997.
The diamond firm had reported some few months ago that it was given "part approval" for its plan to comply with Zimbabwe’s empowerment law.
"Murowa Diamonds has received part approval ... and intends to proceed with implementing a community equity component of that plan," said Murowa managing director Niels Kristensen.
It was not clear why Rio Tinto had decided to release 51 percent as required by the law, when it already had a local partner that controlled a 22 percent stake in the company.
What would have been logical for Rio Tinto was to give up only 29 percent to remain with a 49 percent stake in the company.
However, if what Kasukuwere said was true then its stake in Murowa would be just 27 percent.
Mathew Nyaungwa, Rough&Polished
