ZIMBABWE could lose US$60 million that was supposed to be injected into a new diamond project if government’s proposed indigenisation regulations be
Rio Tinto which owns 56% of Rio Tinto Zimbabwe (RioZim) this week said it could be forced to review a planned diamond project if the indigenisation laws and fixed exchange rate persist.
Parliament recently passed the Indigenisation and Economic Empowerment Bill which is now awaiting President Robert Mugabe’s signature to become law. Parliament is also debating the Mines and Minerals Amendment Bill which will specifically target foreign owned mines.
Rio Tinto also said it was increasingly becoming unviable for the company to embark on its plans to start a new diamond mine due to the fixed exchange rate. The official exchange rate is at $30 000 to the greenback while the parallel market rate is above $2 million.
“It seems there will be no change in the pricing regime in the foreseeable future and further decisions about the mine’s future may have to be made in light of the proposed empowerment laws,” said Rio Tinto in a statement.
Mining companies are not allowed to source foreign currency from the parallel market. President of the Zimbabwe Chamber of Mines, Jack Murehwa, recently said the fixed rate made illegal gold trading lucrative and “attractive as the mines get more from the parallel market than from the Reserve Bank”.
RioZim operates Murowa diamond mine and also controls three gold mines namely Renco, Patchway and Cam & Motor Dump.
Apart from the Indigenisation and Economic Empowerment Bill which requires all foreign owned companies to have a major shareholder who is local, there is also the Mines and Minerals Amendment Bill which also gives the government the legislative authority to acquire 51% of foreign companies mining “strategic fuels and minerals”.
The state will also have the power to take 25% of the 51% ceded without paying for it while the balance of 26% would have to be paid for under a five-year plan.
Impala Platinum the major shareholder of Zimbabwe Platinum mine last year expressed discomfort and concerns over the same issues.
Analysts said if either the indigenisation Bill or the mines and minerals amendment Bill becomes law, it would be difficult for the mining parent companies to have confidence in the local mining sector.