HARARE – The Zimbabwe Stock Exchange (ZSE) says it is investigating Rio Tinto’s disposal of its shareholding in Murowa Diamonds to a foreign firm amid allegations that local listing rules were violated.
This comes as government also recently indicated that it was seized with the matter after it became clear that Murowa was sold to foreign buyers and not locals as previously announced.
“The ZSE has engaged the company over accusations made to determine whether there was a breach or not in terms of ZSE listing requirements before any action is taken as required by the ZSE processes,” the company’s business development executive Lina Mushanguri said.
Rio Tinto, formerly based in Canada but now headquartered in the United Kingdom, disposed of its 78 percent shareholding in Murowa early in 2016.
It was announced that the shares were sold to RioZim, which is controlled by black Zimbabweans but this has since been disproved by investigators.
Information gathered by the businessdaily shows that Rio Tinto disposed of its shareholding in Murowa, for an undisclosed sum, to RZ Murowa Holdings, a British
Virgin Islands incorporated company, controlled by Gem Holdings.
The principal behind Gem Holdings is Harpal Randhawa, who is also the principal behind Gem RioZim Limited, the largest shareholder in RioZim Limited.
Disgruntled shareholders said the nexus between Gem RioZim, Randhawa and Gem Holdings was in breach of ZSE rules regarding the sale or purchase of an entity to related parties.
“Essentially… Randhawa, while putting on a RioZim hat negotiated to buy Murowa Diamonds from Rio Tinto Plc, then turned around and acquired it for himself,” said one of RioZim’s minority shareholders.
Rio Tinto is also accused of violating a July 2004 agreement with RioZim that empowers local shareholders to have pre-emption rights in the event of a sale.
“The shareholders of RioZim were not offered an opportunity to exercise their pre-emptive rights with regards to Rio Tinto Plc’s sale of 78 percent of Murowa Diamonds in accordance with the steps spelt out in the shareholders’ agreement,” sources close to RioZim said.
“In fact, the first time they heard of this transaction was in the media release of June 26, 2015 when the stake had already been sold to RZ Murowa Holdings — a foreign-related party.
“Should it turn out that the board of directors of RioZim Limited waived shareholders’ pre-emptive rights in Rio Tinto Plc’s Murowa Diamonds, they will still have failed to comply with the Zimbabwe Stock Exchange rules to deal with related party transactions and the issuance of cautionary statements when dealing with material transactions,” the sources added.
It has also been established that RioZim failed to publish cautionaries to warn shareholders about the impending transaction of its subsidiary — Murowa Diamonds — as per requirements of listing rules.
Shareholders noted that the diversified mining concern
issued eight successive cautionary statements between September 2014 and May 2015 with regards to the $10 million rights issue for the Cam & Motor project.
The rights issue closed on June 29, 2015 while Rio Tinto made an announcement of the sale of Murowa Diamonds on June 26, 2015.
“We strongly believe the larger shareholders and insiders should not ride roughshod over smaller and minority shareholders.
“How can the investing public have any trust in Zimbabwe’s capital markets if such ‘cowboy’ and high-handed transactions are
allowed to stand?
“We also believe that we will suffer irreparable financial losses should this swindle be allowed to stand,” irate shareholders said.
Efforts to get comment from RioZim were fruitless as the group’s chief executive Noah Matimba did not respond to questions sent to him more than a fortnight ago.