By Daniel Chigundu recently in Zvishavane
GIANT miners RioZim says it is looking at investing about US$125million to extend the life of Murowa Diamond by another three years.
The current life of the mine is coming to an end in the next 18 months and the RioZim board is pursuing the growth of the company by investing large sums of money in brown-field and green-field exploration in the current pits and new areas.
Addressing the Parliamentary Portfolio Committee on Mines and Energy during a tour of Murowa Diamonds Mines operation, RioZim board chairperson Lovemore Chihota said current laws make it difficult for the company to find funds for the required investment.
“To extend the life of the mine by another three years will need a further investment of over US$125 million. This plan will deliver growth in production by another 200 percent making it over 1000 percent since we took over management.
“However, for the company to be able to achieve the objectives and be able to invest the said money, the company needs a conducive business environment within which to operate. It is imperative that government and the private sector should work together in order to bring about the much needed economic transformation of our country,” he said.
Chihota added that his company is facing some serious challenges which are affecting the future viability of Murowa Diamond Mine.
Some of the challenges include an extremely high rate of royalty on rough diamonds in Zimbabwe, adding that the average royalty rate in the region is about 5.57 percent while is charging about three times at 15 percent, making the industry almost unviable in Zimbabwe.
There is also the issue of deductibility of royalties in the calculation of income tax and in more than 20 major mining countries around the world they allow royalty as a tax-deductible expense but according to RioZim “Zimra insists that royalty is not deductible. In other words, suppose we sell our diamonds for US$100, we give US$15 from that to the government for royalty.
“We are left with an income of US$85 and should pay income tax on this US$85 but Zimra insists that we pay income tax even on the US$15 we paid to the government. This effectively increases our rate of royalty to circa 20 percent,” said the company.
RioZim also called for the scrapping of the or revision of the annual ground rental fees for diamond producers arguing that the fees have no legal basis as they are not mentioned in the Mines and Minerals Act.
The mine also wants the government to reconsider the issue of the proposed indigenisation of diamond and platinum adding that this will plan will be highly disruptive and fatal for the sector.
“It is our humble belief that this plan will be highly disruptive and possibly fatal to the two highest revenue and foreign currency generating sectors of our economy.
“To extend the life of our mine by a further three years, RioZim is working on a plan to invest US$125 million. As you will appreciate, this is a massive sum of money for any Zimbabwean company.
“Without firm direction on the indigenisation plan, financiers, lenders and equity holders alike, are unlikely to provide the much-needed funds,” said the company board chairperson.
Murowa Diamond Mine is the only positive case of diamond mining in the country following the disaster and chaos that happened in Marange at Chiadzwa where the country failed to account for the amount of diamonds mined and even revenue generated.
According to former President Robert Mugabe, Zimbabwe could have lost about US$15 billion in diamond revenue owing to shoddy and illicit deals that were happening at the diamonds minefields.
Human rights activist Farai Maguwu who has been vocal about the state of diamond mining in Zimbabwe since the discovery of Chiadzwa actually believes the country could have been prejudiced of more than the announced US$15billion.