Rio Tinto is moving on from Zimbabwe after agreeing to sell its 78 percent stake in the Murowa Diamonds mine and its 50 percent holding in the Sengwa colliery mine to its former local unit RioZim Ltd.
The exit can largely be blamed on rising taxes from the Zimbabwean government.
Rio told employees in Zimbabwe in January that high government taxes are “weighing down the business” to the point it may be forced to close Murowa, its sole diamond mine in the country, according to Bloomberg. The country has steadily raised taxes on everything from mines to water in recent years.
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Rio Tinto already pays a 15 percent royalty on diamond sales as well as other taxes, including corporate tax, and pays more than $109 million per year in land rental.
Earlier this year, Zimbabwe announced year it was planning to merge all diamond mining businesses into one company – part of its black economic empowerment program -- in which the state would own 50 percent of the shares.
"Rio Tinto believes that the future of these assets can be best managed by entities with existing interests in Zimbabwe," the company said in a statement.
RioZim Limited, the Zimbabwe-listed Rio Tinto subsidiary, will assume overall management of both entities. The company already holds 22 percent of Murowa and the other 50 percent of Sengwa.
Alan Davies, head of Rio Tinto’s diamond and mineral unit, said in an emailed statement: “Rio Tinto remains committed to the diamond industry and is focused on operating its two world-class underground mines whilst obtaining the approvals for its advanced diamond project in India."
Last year, the Deutsche Bank AG valued the Murowa diamond mine at $279 million. The mine produced 101,000 carats of diamonds in the fourth quarter of 2014.