Rio Tinto Diamond Mines in Zimbabwe Struggle with Government Legislation
Rio Tinto, the British-Australian based mining and precious resource group, reported a significant increase in diamond production from their Murowa mine in southern Zimbabwe this year. However, the company’s plans for continued expansion have been hindered by a government determined to retain control of diamond profits and push the sale of stones mined in the controversial Marange diamond fields.
According to reports, production at Rio Tinto’s Murowa mine increased from 124,422 carats in 2009 to 178,126 carats last year. These numbers point to a 43% surge in the company’s Zimbabwe unit output by volume in 2010. Rio Tinto is reviewing plans to continue expanding the mine and mine production.
The company hoped to sink $300 million into a development plan which would boost diamond output to 1.8 million carats; however, the project has been delayed because of legal issues. A recently law passed law now requires all foreign-owned businesses to cede 51% of available company shares to locals; Rio Tinto owns 78% of their company while 22% of the company is owned by local shareholder RioZim Limited.
The company only recently restarted mining in the Murowa field after a half-year government ban lifted in August of last year.
According to experts, the mining ban was issued after the international conflict diamond watchdog organization, the Kimberley Process (KP), refused to certify diamond originating from the Marange mines in East Zimbabwe following reports of human rights violations.
The Murowa open-pit diamond mine was initially discovered by DeBeers in the 1970s, but they never opened a mining operation and later gave the property up in the 1990s. In 1997, Rio Tinto discovered the kimberlite deposits and started mining operations. The mine s one of three mines operating in Zimbabwe; the other two being Chiadzwa mine in Manicaland and the River Ranch Mine in southern Zimbabwe, which is owned by a Zimbabwean conglomerate. The controversial Marange mines were also initially owned by De Beers. Since then, De Beers ceded their claim on that mine as well and no longer hold a stake in any mining operations in Zimbabwe.
Since Murowa’s completion in 2004, new diamond deposits were discovered in the Marange fields. The new deposits have been mined heavily despite ongoing reports of human rights abuse by the government and military. However, the KP has suspended certification of these diamonds and has yet to rule on their legitimacy.
Because sales from the Marange mines provide with the government with a significant percentage of its income, Zimbabwe hoped the recent government ban on Murowa mining would pressure the KP into recertifying Marange stones. This was not the case.
A Zimbabwe minister reported to Reuters last week that the government will continue requiring foreign-owned diamond mines operating in the country to forfeit majority stakes. However, he qualified his statement by mentioning that the government would spare those operating in the controversial Marange fields, including a Chinese-owned mine. It is not known at this time whether the Murowa mine, one of the largest in the country, would be included in this exemption.
***
FJA is a forum open to a diversity of opinions in support of its mission. Any editorial expressed in this article represents the opinion of the author, and not necessarily the views of Fair Jewelry Action members.
