HARARE – Controversy continues to dog Rio Tinto’s disposal of its 78 percent shareholding in Murowa Diamonds, amid fresh claims that the mine was sold for a song under suspicious circumstances to a Virgin Islands-registered company, RZ Murowa Holdings, in contravention of Zimbabwe’s laws.
When Murowa was disposed off last year, it was announced at the time that Rio Tinto, the London-headquartered British-Australian multinational metals and mining corporation, had sold its shares in the coveted local diamond miner to RioZim, which is controlled by black Zimbabweans.
However, information in possession of the Daily News suggests that Rio Tinto may in fact have violated local indigenisation and listing rules by disposing Murowa and Sengwa Colliery to British tycoon Harpal Randhawa, the owner of RZ Murowa Holdings.
Murowa, which produces an average of 42 000 diamond carats per month valued at about $6,5 million, is also said to have been sold for a surprisingly low $19 million — raising further eyebrows about the transaction and how this was sanctioned.
A source familiar with Murowa’s operations said at the weekend that although the government and the Zimbabwe Stock Exchange were seized with the matter, it was only proper that they escalated their investigation into the matter, as “too many things don’t make sense”.
“Murowa’s output can also easily be doubled with a mere $3 million investment, which would see the mine producing 100 000 carats a month, earning the country at least $15 million a month.
“It is also in that light that it beggars belief that a foreigner was allowed to buy the asset for a song, and without any money flowing into the country, at a time that Zimbabwe is experiencing a debilitating cash crunch,” the source said.
A former Murowa executive who spoke to the Daily News yesterday was also incredulous about the conditions under which the mine and Sengwa had been sold.
“Zimbabwe simply has to do better in managing its resources in such a competitive global economy. Giving away its two premier mining assets for a song should not be part of the script,” the former manager said.
At the time of the transactions, RioZim shareholders accused Rio Tinto of allegedly violating a July 2004 agreement with RioZim, which supposedly accorded the local shareholders pre-emptive 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.
“In fact, the first time they heard of this transaction was with the media release of the 26th of June 2015 when the stake had already been sold to RZ Murowa Holdings, a foreign entity.
“Should it turn out that the board of RioZim Limited waived shareholder’s pre-emptive rights in Rio Tinto Plc’s Murowa Diamonds, they will still have failed to comply with the Zimbabwe Stock Exchange’s rules to deal with related party transactions and the issuance of cautionary statements when dealing with material transactions,” a disgruntled shareholder said.
It has also been alleged that RioZim failed to publish cautionaries warning shareholders about the impending transaction of its subsidiary, Murowa Diamonds, as per the requirement of local listing rules.
However, RioZim management remains adamant that the disposal of Murowa was kosher and above board.
“The relationship between RioZim and Murowa Diamonds (Private) Limited has not changed as a result of Rio Tinto Plc’s sale of its interests in Zimbabwe last year.
“On 10 June 2015, the Board of Directors of RioZim passed a resolution to irrevocably and unconditionally waive the company’s rights of pre-emption in connection with the transfer of the sale of shares to RZ Murowa Holdings Limited,” RioZim chairman Lovemore Chihota said.
He added that the resolution had been made in light of the financial challenges being faced by RioZim, its inability to raise the required financing, plus the challenges faced by Murowa Mine which was closed at the time and facing huge hurdles that required, amongst other things, substantial additional capital investment.
He said the decision was also discussed and approved at the company’s annual general meeting that was held on August 28, 2015 — and they had kept authorities informed on all developments.