RioZim boss under fire
RioZim chairman Lovemore Chihota has come under fire from the company’s shareholders and other interested stakeholders for misleading the nation on the Murowa Diamonds (Murowa) deal.
Chihota told the country that global resources firm Rio Tinto, which operated in Zimbabwe for close to 60 years, disposed its 78 percent shareholding in Murowa to RioZim but latest information shows that the stake was bought for a paltry $19 million by a British national Harpal Randhawa, owner of RZ Murowa Holdings.
Shareholders who spoke to the Daily News said Chihota was aware of the fact that Randhawa, the principal behind GEM RioZim, the largest shareholder in RioZim, negotiated the deal for himself at the expense of other shareholders.
At the time of Murowa sale, Chihota said RioZim was “committed to running this company better than how we found it.
“There’s no reason why we should fail to run these things for the betterment of our people” giving the impression that RioZim was now the majority shareholder in the Zvishavane-based mine.
“Chihota, who was Mines minister Walter Chidakwa’s chairman at the Zimbabwe Investment Centre, used his relationship with the minister to hoodwink the nation.
“He single-handedly assured Randhawa that RZ Murowa would not be subjected to indigenisation regulations,” sources knowledgeable about events at RioZim said.
Zimbabwe’s indigenisation laws, which came into effect in 2008, force foreign-owned firms to cede 51 percent of their shareholding to locals.
Sources also said local construction firm, Tarcon, was forced to cease operations at Murowa when Randhawa assumed control of the diamond mine.
“Tarcon was the largest contractor at Murowa for close to eight years and despite having signed long contracts to continue mining on behalf of Murowa, the contract was immediately stopped without any meaningful explanations,” former Tarcon employees said.
Although RioZim claims that the mine was closed for nine months in 2015 due to lack of capital, information at hand shows that Murowa had stockpiles of diamond ore during that period, a move that was aimed at making Randhawa a lifesaver, shareholders say.
Unveiling new mining equipment at Murowa in November last year, Chihota said RioZim had invested $60 million as part of the company’s expansion programme.
However, sources said the mine, which had been operating at the same scale for the past 10 years, did not require such huge amounts to re-open after “mothballing” for only nine months.
The latest developments come at a time when the government and the Zimbabwe Stock Exchange are investigating the sale of Murowa after shareholders pointed out a lot of irregularities.
For instance, shareholders accuse Rio Tinto of violating a July 2004 Agreement with RioZim that empowers local shareholders to have pre-emption rights in the event of a sale.
“As shareholders…we were not offered an opportunity to exercise our pre-emptive rights with regards to Rio Tinto Plc’s sale of 78 percent of Murowa Diamonds in accordance with the steps spelt out in the shareholders’ agreement,” disgruntled shareholders told the Daily News.
“In fact the first time we heard of this transaction was with the media release of the 26th of June 2015 when the stake had already been sold to RZ Murowa Holdings — a foreign related party.
“Should it turn out that the Board of Directors of RioZim Limited waived shareholder’s pre-emptive rights in Rio Tinto Plc’s Murowa Diamonds, they will still have failed to comply with the Zimbabwe Stock Exchange rules to deal with Related Party transactions and the issuance of cautionary statements when dealing with material transactions,” the shareholders added.
It has also since been established that RioZim failed to publish cautionaries to warn shareholders about the impending transaction of its subsidiary — Murowa — as per requirement of listing rules.
Shareholders noted that the diversified mining concern issued eight successive cautionary statements between September 2014 and May 2015 with regards to the $10 million rights issue for the Cam & Motor Project.
The rights issue closed on June 29, 2015 while Rio Tinto made an announcement of the sale of Murowa Diamonds on June 26, 2015.
“We strongly believe the larger shareholders and insiders should not ride roughshod over smaller and minority shareholders.
“How can the investing public have any trust in Zimbabwe’s capital markets if such ‘cowboy’ and high-handed transactions are allowed to stand?
“We also believe that we will suffer irreparable financial losses should this swindle be allowed to stand,” irate shareholders said.
Chihota, however, remains adamant that the disposal of Murowa was done above board.
“The relationship between RioZim and Murowa Diamonds (Private) Limited has not changed as a result of Rio Tinto Plc’s sale of its interests in Zimbabwe last year,” he said.
“On June 10, 2015, the Board of Directors of RioZim passed a resolution to irrevocably and unconditionally waive the company’s rights of pre-emption in connection with the transfer of the sale of shares to RZ Murowa Holdings Limited,” he added.
Chihota said the resolution was made in light of the financial challenges being faced by RioZim, its inability to raise the required financing plus the challenges faced by Murowa which was closed down at the time and faced huge hurdles that required, among other things, substantial additional capital investment.
The decision was also discussed and approved at the annual general meeting held on August 28, 2015, he said adding that the company kept authorities informed on the developments. Daily News