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Rio Tinto resists forced merger, opts out of Zim

Chrome Mining Sector in Zimbabwe: The Chininga Report

by Staff Reporter

ZIMBABWE-RIO Tinto Plc, the world’s sixth largest resources firm, has left Zimbabwe in a huff in protest against a forced merger of its operations with seven fly-by-night diamond firms operating in the Chiadzwa (Marange) diamond fields.

Chrome Mining Sector in Zimbabwe: The Chininga Report

Rio Tinto refused to be bullied

The group announced last week that it had sold its 78 percent stake in Murowa Diamonds and was leaving the country.

This follows months of protracted negotiations between President Robert Mugabe’s government and the global mining giant as the latter resisted attempts by the government to effectively nationalise its mining operations.

Early this year, Mines and Mining Development minister Walter Chidhakwa announced the compulsory merger of all diamond-mining operations in the country. Initially the forced merger targeted the seven firms operating in Chiadzwa, but this was later changed to include the privately owned Murowa Diamonds.


In a hectoring tone, Chidhakwa indicated that the government would not accept any objections from the affected mining firms, adding that the State was ready to compensate mining houses that would not accept the new arrangement, after which they would be asked to leave the country.

“If you do not want to be in this company, we might have to work out ways, methods of parting ways (and) the kind of compensation that we need to give to those who many not want to participate in this company,” said Chidhakwa.

The shock announcement prompted Rio Tinto Plc to send its senior executive, Jean Marc Lieberherr, to Harare in March for talks with Chidhakwa and members of President Mugabe’s government, but the latest developments show that the talks were unfruitful resulting in the global resources firm losing confidence in Zimbabwe and therefore opting out.

When Chidhakwa made a surprise inclusion of Murowa Diamonds into the consolidated diamond firm—in which the government would give itself a 50 stake—analysts pointed out that President Mugabe’s government was desperate to get hold of machinery and technology suitable for underground mining of the diamondiferous kimberlites that are all that is remaining in Chiadzwa. The underground mining technology is only available at Murowa Diamonds hence the smash and grab move by Chidhakwa.

Last year the government reported that the easy-to-mine alluvial diamonds, which the seven secretive firms had been mining in Chiadzwa, were virtually depleted. It then started making moves to amalgamate for operations of the firms before suddenly roping Murowa in.

Until the latest changes, Rio Tinto Plc owned Murowa Diamonds 78 percent with the remaining 22 percent being held by the Zimbabwe Stock Exchange-listed Rio Tinto Zimbabwe (RioZim).

The shock exist of Rio Tinto Plc from Zimbabwe is a major blow to the country’s efforts to lure foreign investment.