Zimbabwe ownership law stymies RioZim's bold expansion plan
(Bloomberg) — RioZim Ltd., a Zimbabwean diamond, nickel and gold miner, wants to more than double output of gemstones at its Murowa mine. The problem is the expansion depends on attracting $125 million in investment against a backdrop of high royalties and ownership laws that scare investors.
President Emmerson Mnangagwa, who replaced President Robert Mugabe after military intervention in November, has said the southern African nation won’t apply the ownership laws, known as the Indigenization Act, to most minerals. However, it still applies to miners of diamonds and platinum, which will be required to sell or transfer 51 percent stakes to black citizens.
“Without firm direction on the indigenization plan, financiers, lenders and equity holders alike are unlikely to provide the much-needed funds,” RioZim Chairman Lovemore Chihota said. “We need $125 million to give the mine a further three years of life, but as you will appreciate, this is a massive sum of money for any Zimbabwean company.”
Still, Murowa is targeting output of 1.1 million carats this year, up from 795,000 in 2017 and this could rise to 3.5 million carats if it secures funding. Without the investment the mine has less than 18 months left.
“We’ve scaled up our processing capacities,” Chief Executive Officer Bheki Nkomo told Bloomberg at the mine in the southern district of Zvishavane. “Now we’re recovering more diamonds, but royalties on sales are still higher than in neighboring countries.”
Royalties in Zimbabwe stand at 15 percent compared with 10 percent in Botswana and Namibia, Nkomo said. Zimbabwean gemstone miners also pay annual rent of $3,000 a hectare (2.5 acres), he said.
(Written by Brian Latham)