De Beers mulls acquisition of major part of Rio Tinto's stake in Murowa, says report

De Beers Consolidated Mines (DBCM) is reportedly considering the acquisition of a major stake in Rio Tinto's Murowa diamond mine in Zimbabwe, according to the country's Business Digest.

Rio Tinto owns 78 percent of Murowa, which produces more than 300,000 carats annually, while Zimbabwe Stock Exchange-listed RioZim Limited owns the rest.

Rio Tinto the world's third-largest mining and exploration firm, announced last year that it planned to sell its diamond business since it did not fit in with its overall mining strategy.

As many as seven potential suitors were looking into the purchase of part of Rio Tinto's stake, the newspaper reported, citing sources close to developments at Murowa.

"The first imperative is for the whole deal to comply with the country's indigenization laws," the sources said. "This means that only 49 percent of Rio Tinto's stake is available for possible acquisition by non-indigenous players, whilst indigenous partners will take up the additional 19 percent required to reach the 51 percent [as required by law]."

The other 10% is likely reserved for employees and management as is now common under empowerment structures.

The eventual final bidder would have to partner with local shareholders in order to comply with the country's indigenization laws.

"Most of those bidders are consortia comprising local and South African investors. They include some of the large South African mining houses already significantly involved in diamonds," the sources said.

In addition to Murowa, Rio Tinto's other diamond operations include the 100-percent owned Argyle mine in Australia, and a 60-percent share in the Diavik mine in Canada's NorthWest Territories.

Rio Tinto is the world's third-largest producer of mined diamonds.