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‘Rio Tinto plans to quit mining sector’

RIO TINTO has agreed to sell 29% of its shareholding in Murowa Diamonds to locals as the global resources giant plots an exit from the country’s mining industry.

BY NDAMU SANDU

Rio Tinto has 78% shareholding in the diamond producers and the remainder is owned by Rio Zim, a Zimbabwean listed entity.

Informed sources said Rio Tinto had wanted to exit the local mining industry but would not do so without complying with the Indigenisation Act.

The legislation stipulates that all businesses with a net asset value equal to or above US$500 000 located in Zimbabwe should formulate plans that will lead to 51% of the shares being transferred to “indigenous” Zimbabwean shareholders within five years from the date of operation of the regulations.

According to information obtained last week, Rio Tinto would transfer 10% to the community trust, 10% to employees and 9% to the National Indigenisation and Economic Empowerment Fund (NIEEF).

The value and financing for the transaction were still being worked out last week though Standardbusiness is reliably informed the parties might go for notional vendor financing to conclude the deal.

This would involve Rio Tinto providing credit to be repaid through forfeiting of dividend by the local shareholders. The same method was used in the Unki Mine transaction.

The launch of the community trusts would be done within two weeks, according to people familiar with the matter.

An executive at Murowa said indigenisation and expansion were sensitive matters when asked what steps the diamond producer had made to comply with the indigenisation legislation.

Critics of the indigenisation legislation say the plan scared away foreign investment needed to rebuild the economy.

The Medium Term Plan projects foreign direct investment to contribute 25% to the country’s Gross Domestic Product by 2015 from the current 4%.

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