ZIMBABWE Stock Exchange listed mining group RioZim Ltd (RioZim) is undecided over acquiring a 78% shareholding up for sale in Murowa Diamonds (Murowa), the company’s top executive has said.
Report by Taurai Mangudhla
RioZim MD Ashton Ndlovu said the Zimbabwean company, which holds the remaining 22% stake in Murowa, would only decide on a final course of action depending on offers from Rio Tinto for the 72% and what the market offers to buy RioZim’s 22%.
“We do have pre-emptive rights for the 78% owned by Rio Tinto plc and depending on the price we will either be buyers or sellers,” said Ndlovu recently at an analyst briefing. “The process is still ongoing and there have been expressions of interests.”
Whatever deal comes out of the transaction, sources say, it would have to be within the provisions of the Indigenisation and Economic Empowerment Act, which requires that at least 51% shareholding in all companies operating in Zimbabwe should be owned by indigenous people.
This means only 49% will be owned by foreign players, a situation RioZim insiders say is deterring potential investment.
“The kind of investment needed in such big ventures is not easily available locally especially after what we are trying to recover from and at the same time we are losing out on foreign investment because of our politics,” said one source at RioZim.
Recently, businessdigest reported that as many as seven potential suitors were eyeing the takeover of part of Rio Tinto’s stake in Murowa.
At the time, sources said most of the bidders were consortia comprising local and South African investors, including some of the large South African mining houses already significantly involved in diamonds. In March last year, Rio Tinto announced plans to exit its diamond operations worldwide, including Zimbabwe, Canada and Australia.
Rio Tinto Diamonds operates three diamond mines — the Argyle Diamond Mine in Western Australia (100% ownership), the Diavik Diamond Mine in the Northwest Territories of Canada (60% ownership), and the Murowa. Together, the three Rio Tinto mines produce 20% of the world’s annual output of rough diamonds, making Rio Tinto the world’s third-largest producer of mined diamonds.
According to Rio Tinto production figures, Murowa annual production for 2012 grew 9% to 313 000 carats compared to 285 000 carats in 2011.The Zimbabwean mine’s production went up 11% in the fourth quarter of 2012 to 98 000 carats in the fourth quarter of 2012 compared to 88 000 carats in the same period prior year.
At its annual financial results briefing for the period ended December 31, 2012, RioZim announced turnaround strategy expected to see the company turn to profitability in the current year and at the same time clearing most of its arrears to local banks.
Last year, arrears owed to five major banks stood at US$91 million including US$60 million accruing from interest charges which were 22% last year before closing the year at around 16%.
Acting RioZim CFO Bekinkosi Nkomo was to later tell the briefing the debt had since been reduced to US$45 million and should be paid off over a period of between 24 and 26 months under new terms. The management team said the new terms could see interest being charged at less than the current rates of between 10 and 12% per annum.