Harare: RioZim Ltd., which controls a 22 percent shareholding in Murowa Diamonds, has announced that it is mothballing the company and the Murowa mine, located in Zimbabwe’s Midlands.

The mine was technically grounded in the first quarter of this year, but it was thought that production would recommence at some point in the last quarter of the year. In June, Rio Tinto plc announced that it had sold its 78-percent interest in Murowa Diamonds, amid increasingly difficult trading conditions. These particularly related to the actions of the Zimbabwe government, whose tax demands were felt to be hostile toward the diamond industry.

In January, Murowa Diamonds’ managing director Zebra Kasete said, “The business is facing formidable challenges, which could have serious implications for our operation.” “The management team is continuously engaging government and hope for some positive outcome from this process; else the viability of Murowa Diamonds as a going concern will be impacted,” he added.

The closure of Murowa is another blow to the Zimbabwean diamond industry that is already suffering due to the global downturn in global mineral prices. The situation has also not been helped by the government’s plan to merge the country’s seven mines into one consolidated mining outfit, with the state taking a 50 percent stake. The government claims that this move is to improve transparency and efficiency in the industry, which has indeed suffered from mismanagement and corruption.

Reports indicate that the alluvial diamonds in Zimbabwe have run out. There are, however, indications that the country is extremely rich in kimberlites, but the capital needed to extract those stones is much greater than with alluvial diamonds – with companies hesitant to invest, because of the difficulty of doing business with the Zimbabwe government.