UPDATE 3-Mugabe woos mining firms, promises stable policies

* Approves 15 mining projects worth $400 million since Feb

* Mining now key sector after collapse of agriculture

* Rio Tinto says uncertainty blocks investments

(Adds Rio Tinto quotes, exploration firm, details)

By Nelson Banya and MacDonald Dzirutwe

HARARE, Sept 16 (Reuters) - Zimbabwe's President Robert Mugabe urged foreign mining companies to invest in the southern African country and sought on Wednesday to allay fears that such businesses could be expropriated.

Mugabe told a mining conference in Harare that the government would soon pass a new law to govern the sector, which would address concerns raised by an earlier draft that had said foreign mining companies could not hold more than 49 percent of a business and had to sell any stake above that to Zimbabweans.

Following the collapse of commercial agriculture, mining has become the top foreign currency earner, with gold alone bringing in a third of total export earnings to a country that says it is unlikely to receive bilateral assistance soon.

Mugabe, trying to woo badly needed foreign investment, said the law would seek a balance between attracting investors and empowerment of Zimbabweans - a key concern for his government.

Poor power supply to mines was also a big concern to existing and potential investors

Mugabe said the proposed mining law would be debated in the next session of parliament, which starts later this month.

"The review of the Mines and Minerals Act will seek to strengthen the relationship between the government and mining houses," he said in a speech. "It also seeks to ensure that Zimbabweans benefit from their natural resources through the creation of an enabling framework."

The mining conference is part of efforts by a new power-sharing government to attract investment in Zimbabwe, which has the world's second-biggest platinum reserves after South Africa and large deposits of diamonds, coal and nickel.

"The government is committed to ensuring that the policy environment is stable, predictable and sufficiently attractive to guarantee investors good returns," Mugabe said.

Victor Gapare, the president of Zimbabwe's Chamber of Mines said Mugabe had reiterated to a handful of concerned investors in a private meeting the country would not expropriate mines.

The previous mining draft law raised fears of a repeat of the violent seizures of white-owned commercial farms in 2000, which Mugabe defended as necessary to correct colonial land imbalances but which critics blame for acute food shortages.

INVESTORS FACE UNCERTAINTY

Participants at the conference said uncertainty over policies would continue holding back big new mining investment.

Niels Kristensen, head of Rio Tinto's diamond unit in Zimbabwe said at the conference although he was encouraged by the country's aim to improve its mining sector, more must be done to resolve uncertainty and attract new cash.

"Until we see some certainty, there won't be significant investment in mining," he said.

But some new cash was trickling into the mining sector.

Elton Mangoma, Zimbabwe's economic planning minister, said the country had approved 15 mining projects worth $400 million since February this year, and some were already being developed.

Zimbabwe, which has had no meaningful exploration for the last decade, said it would set up a company to explore minerals in areas seen as high risk by private mining firms.

Mining companies in Zimbabwe include Anglo American unit Anglo Platinum, Impala Platinum and Rio, a major shareholder in a diamond mine. (Writing by James Macharia, Editing by Peter Blackburn) (macdonald.dzirutwe@reuters.com; +263 4 799 112) (For full Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/)