Rio Tinto entered the then Southern Rhodesia (now Zimbabwe) in 1956 as Rio Tinto Southern Rhodesia Limited.
Its initial operation in the country was on the Empress Nickel deposit in Kadoma.
This was the first of Rio Tinto’s global ventures, according to information gleaned on the RioZim website.
Following years of mining nickel, copper, coal and other minerals, Rio Tinto commenced an exploration programme in Zimbabwe in the early 1990s focusing only on diamonds.
The exploration yielded results in 1997 when the company discovered three diamond-bearing kimberlite pipes in the Murowa area, located southwest of Zimbabwe some 450 kilometers from the capital Harare.
Feasibility studies and mine planning were done between 1998 and 2000, which saw a small mine site being commissioned in 2004.
Since 2004 over 1 million carats had been produced and sold on international markets with 10 per cent of Murowa Diamonds’ production reserved for the local cutting and polishing industry, as prescribed by the country’s laws.
The open pit mining operation had a capacity of producing about 400,000 carats per annum of large, predominantly white, gem-quality diamonds.
As of 2013, the mine reserves of rough diamonds amounted to about 4.9 million carats at an average diamond grade of 0.9 carats per tonne of ore.
Rumours that eddied around in 2013 had it that Rio Tinto, which owned 78 percent of Murowa Diamonds, wanted to offload its stake in the operation.
At some point reports even suggested that De Beers Consolidated Mines, the diamond group’s South African unit, was one of the seven potential suitors eyeing the takeover of Rio Tinto’s shares in the mine.
De Beers had previously done some extensive exploration work in the area but failed to locate the diamond deposit.
Although no reasons were given as to why it wanted to get rid of Murowa, one could only speculate then that it partly had to do with the country’s indigenisation policy that limited shareholding in local mines by foreign entities to a ceiling of 49 percent.
Some mining firms had capitulated to the demands; Rio Tinto appeared to have resisted the pressure, as it continued to hold on to its 78 percent stake in the mine.
Quitting
Despite the seeming absorption of Harare’s pressure, reports again indicated early this year that Rio Tinto had notified staff in Zimbabwe that government taxes, not the indigenisation policy, would likely force it to close Murowa, which was valued at $279 million by Deutsche Bank in 2013.
“The government has slated a regime of taxes that include ground rental fees, which are weighing down the business,” Zebra Kasete, the managing director of the mine, said in a letter to staff seen by Bloomberg at the time.
“The management team is continuously engaging government and hope for some positive outcome from this process; else the viability of Murowa Diamonds as a going concern will be impacted.”
Bloomberg noted in January that land rental for diamond mines was $3 000 per hectare and Murowa owned more than 30 000ha, costing the company about $109 million a year.
As that was not enough, the company was expected to pay a 15 percent royalty on all diamond sales as well as other taxes including corporate tax and a levy used to fund combating the HIV epidemic in the country.
Having kept the public guessing for six months, Rio Tinto finally came out in the open late last month as it announced that it had sold its 78 percent stake in Murowa Diamonds as well as its 50 percent share of Sengwa Colliery.
It said that its interests in the diamond and coal mines had been sold to a company called RZ Murowa Holdings.
RioZim, an independent mining company in Zimbabwe, holds a 22 percent interest in Murowa Diamonds and a 50 percent stake in Sengwa, assumed the overall management of both mines.
Rio Tinto said the future of these assets could 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 whilst obtaining the approvals for its advanced diamond project in India,” said company diamonds and minerals chief executive Alan Davies. Rio Tinto operates in Australia and Canada.
While the exit can be linked to the tax concerns indicated in the Bloomberg January report, it should be also stated that the recent move by Zimbabwe to have all diamond mining companies - including Murowa Diamonds and DTZ-OZGEO - merge their operations and then establish a joint venture company with the state, had miffed Rio Tinto.
The miner was said to be not happy, as Harare had previously indicated that it would only consolidate Marange operations to improve accountability and transparency.
The Daily News reported last March that Rio Tinto’s Murowa had requested for further engagements with the country’s mines ministry to seek clarity on the implementation of the plan.
The daily, however, claimed that it was in possession of a letter addressed to a company top official Gary O'Brien, by mines secretary Francis Gudyanga who argued that the miner’s eventual equity in the merged unit would be ascertained by various factors.
“(We will consider) an outcome of evaluation of Murowa by an independent company and discussions with Zimbabwe Mining Development Corporation (ZMDC) and also Murowa’s contribution to exploration as well as capitalisation of ZCDC,” he was quoted as saying.
Gudyanga was also said to have demanded that government “receives Murowa’s willingness to participate in the… consolidation programme”.
So, this coupled with the tax burden, high rentals and pressure to obey the country’s indigenisation policy could have been the proverbial stroll that broke the camel’s back.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
