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'RioZim waived pre-emptive rights on Murowa'
23/05/2016 00:00:00
by The Source

HARARE: Zimbabwe resources group RioZim says it gave up its pre-emptive rights to Murowa Diamonds ahead of the Midlands-based gem miner’s sale last year because it could not afford the purchase price.

Global giant Rio Tinto sold off its 78 percent stake to RZ Murowa Holdings Limited, along with its 50 percent shareholding in Sengwa Coal in June last year, but government last month said it was investigating the circumstances under which the ownership changed hands.

RZ Murowa is an investment vehicle of major RioZim shareholder, private equity firm Global Emerging Markets (GEM Holdings).

At the sale, RioZim, which controlls 22 percent of Murowa and 50 percent of Sengwa, assumed the overall management of both entities.

“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,” said RioZim in a statement to the Zimbabwe Stock Exchange on Monday.

Reports suggested that RioZim shareholders were not offered an opportunity to exercise their pre-emptive rights over the sale of Murowa, in accordance with the shareholder’s agreement with Rio Tinto, but the local miner said it had no money to fund the purchase.

“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,” said RioZim.

“The resolution was 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 down at the time and faced huge hurdles that required, amongst other things, substantial additional capital investment.”

The decision was also discussed and approved at the Annual General Meeting held on 28 August 2015, it said.

The company kept authorities informed on the developments, it added.

GEM’s initial 2012 investment saved RioZim, one of Zimbabwe’s biggest mining firms, from imminent collapse under the burden of debt. GEM has dominated subsequent capital-raising initiatives by the miner, as hard-up local shareholders struggled to follow their rights.

RioZim early this year successfully completed a debt restructuring exercise early this year in which Zimbabwe Asset Management Corporation (Private) Limited ‘Zamco’, a division of the RBZ acquired some of its short-term debt of nearly $34 million and lowered finance costs by half, creating fiscal space for the resources group.


In the three years to June last year, RioZim had paid $36,3 million in interest charges but only reduced its core debt from $58 million to $43,1 million.

The Zamco deal saw interest rates charges on the debt, which averaged over 21 percent, come down to nine percent.

Zamco was set up by government to purchase non-performing loans from banks and clean their balance sheets. Apart from RioZim, it has said it intends to purchase bade debts of Cottco Holdings, Hwange Colliery, Cairns Foods, Border Timbers, Astro Motors and the Cold Storage Company.

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