Sep 1, 2009
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Zimbabwe presses for 50% shares in diamond mines

Sep 1, 2009

HARARE, Sept 1 (Reuters) - Zimbabwe's mines minister has said the government will insist on 50 percent shareholdings in all diamond mining ventures, state media reported on Tuesday 1 September, a move likely to worry potential investors.

The southern African country passed empowerment legislation two years ago forcing foreign-owned mines to hand majority control to locals and the government.

But the formation of a unity government between President Robert Mugabe's ZANU-PF and Prime Minister Morgan Tsvangirai's Movement for Democratic Change (MDC) in February raised hopes that the MDC would influence the scrapping of the legislation.

Mines Minister Obert Mpofu said the government would not negotiate on its stance. The government is broke and would not be able to pay for the shareholding.

"With diamonds, we want 50-50 percent shareholding in joint ventures with investors, that's not negotiable," Mpofu was quoted by the Herald newspaper as telling parliament's committee on mining.

Mpofu is consulting industry officials on a new mining bill which investors had hoped would scrap the requirement for foreign mines to sell majority shares to locals. It is expected that the model for the diamond sector would be different from that governing gold or platinum mines.

Murowa mine in central Zimbabwe, majority owned by Rio Tinto (RIO.L) RIO.A, is the country's largest diamond mine, while the privately run River Ranch mine is the second.

But Zimbabwe also has poorly secured diamond fields in Marange where it deployed troops to seal off the area to clamp down on illegal mining.

A Kimberly Process review team -- mandated to monitor and regulate diamond trade globally -- visited Zimbabwe's diamond mines in July and called for the "immediate demilitarisation" of the Marange fields and measures to stop smuggling.

The World Diamond Council last week said the country should implement the Kimberly Process recommendations or risk suspension.

But Mpofu said the army would only move out once the government had addressed security issues around the fields.

He however said the government was negotiating with some investors to partner in the mining of diamonds in Marange, in eastern Zimbabwe, where he said sales of diamonds amounted to $8.2 million this year. A government agency is doing the mining there.

"We are talking to big investors, we are finalising the details and very soon we will be commissioning the mine. These are, however, delicate and sensitive negotiations," he said without giving details.

(Reporting by MacDonald Dzirutwe)

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