22 February 2013

Zimbabwe: Debeers Eyes Rio Tinto's Murowa Stake

SOUTH African diamond mining giant, DeBeers Consolidated, is reportedly eyeing a major stake in Rio Tinto's Murowa diamond mine following reports the group plans to exit the diamond mining business, businessdigest has established.

Sources close to developments at Murowa told businessdigest this week that as many as seven potential suitors were eyeing the takeover of part of Rio Tinto's stake in Murowa diamonds.

"Most of those bidders are consortia comprising local and South African investors. They include some of the large South African mining houses already significantly involved in diamonds," the sources said.

In March last year, Rio Tinto announced plans to exit its diamond operations in 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 Diamond Mine located in Zimbabwe (78% ownership).

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.

"The first imperative is for the whole deal to comply with the country's indigenisation laws," the sources said. "This means that only 49% of Rio Tinto's stake is available for possible acquisition by non-indigenous players, whilst indigenous partners will take up the additional 19% required to reach the 51%."

The other 10% is likely reserved for employees and management as is now common under empowerment structures.

DeBeers is reported to have once extensively explored the lowveld area and reportedly failed to locate the diamond deposit in Zvishavane, which was eventually found by Rio Tinto geologists at the site of the current Murowa Diamond Mine.

DeBeers has also been linked to successful diamond exploration activities in Bikita and Lower Gweru areas.

The eventual final bidder would have to partner with local shareholders in order to comply with the country's indigenisation laws.

DeBeers has a sound record of working well with local empowerment partners in some of the various countries in which it operates diamond mines. In South Africa, DeBeers controls 74% of the diamond mining operations whilst the local black empowerment partners have 26%.

Debswana in Botswana is a 50:50 partnership between the Botswana government and the Swiss-based De Beers Centenary, a 100% subsidiary of DB Investments.

By far the world's leading diamond company, De Beers was founded in 1888 by Cecil John Rhodes. The company has been run by the Oppenheimer family or trusted associates since the late 1920s.

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