LISTED mining group, RioZim Limited has opened talks with Rio Tinto PLC in a bid to take full control of the Murowa diamond mine as the global mining major seeks to leave the gem business, a key shareholder said on Thursday.
Rio Tinto has a 78 percent stake in Murowa, a diamond mine which produced 324,000 carats in the last financial year, while RioZim controls 22 percent of the mine.
Locally-owned RioZim was created in 2004 when Rio, the world's third largest miner, largely left Zimbabwe while retaining its diamond interest.
RioZim is keen to exercise its pre-emptive rights to acquire Rio Tinto's shares in Murowa, Harpal Randhawa, whose private equity group Global Emerging Markets (GEM) recently bought 25 percent of the Zimbabwean firm, told an investment conference in Harare.
"We're now in discussions with Rio Tinto Plc to acquire the 78 percent of Murowa that they want to offload," Randhawa said.
Rio Tinto signalled its intention to leave the diamond industry in March, effectively inviting bids for its $1.2 billion diamonds business, which also includes two other mines in Australia and Canada.
Randhawa, who said only time would tell if his group's decision to invest in RioZim was "either brave or stupid," said the firm was compliant with Zimbabwe's empowerment law as it was 54 percent controlled by locals.
President Robert Mugabe is championing a law that seeks to transfer at least 51 percent shareholding in foreign firms, including mines and banks, to locals.
Several foreign firms, including the world's two largest platinum miners, Anglo American Platinum and Impala Platinum are in talks with the government over plans to turn over majority stakes in their local operations to Zimbabweans.
"The main constraint that indigenisation has put on any company is a capital constraint due to the limited ability of locals to inject capital," Randhawa said.
RioZim, which is battling to clear a $50 million debt owed to local banks, badly needs to recapitalise its gold mines and develop its substantial coal and chrome concessions.