Taxes May Force Rio to Close Gem Mine in Zim

Harare: Rio Tinto Group told staff in Zimbabwe that government taxes may force it to close its sole diamond mine in the country, a letter to staff shows.

The Murowa Diamond Mine, which is 78 percent held by London-based Rio, was valued at $279 million by Deutsche Bank in 2013. It produced 101,000 carats of gems in the fourth quarter of last year.

“The government has slated a regime of taxes that include ground rental fees, which are weighing down the business,” Zebra Kasete, managing director of the mine, said in the letter dated Jan. 26 and seen by Bloomberg News. “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.”

Over the past year Zimbabwe’s government has raised or imposed taxes on everything from mines to water in a bid to raise revenue to pay government workers, the salaries of whom account for 88 percent of state spending.

Kasete wasn’t available when his office was called and Illtud Harri, a London-based spokesman for Rio, said he immediately comment.

Land rental for diamond mines is $3,000 per hectare (2.71 acres) and Murowa owns more than 30,000 hectares, costing the company about $109 million a year, a person familiar with the situation said, asking not to be identified because he isn’t authorized to speak to the press on the issue.

In addition, there is a 15 percent royalty on gem sales as well as other taxes including corporate tax and a levy used to fund combating the HIV epidemic in the country.