September 16, 2014 / 5:01 PM / 3 years ago

UPDATE 1-Russian firms to develop $3 bln Zimbabwe platinum mine

* $3 bln Darwendale project is single largest investment

* Shunned by Mugabe looks to China, Russia for help

* Zimbabwe looks to Russia for military equipment (Recasts with details, quotes)

By MacDonald Dzirutwe and Nelson Banya

HARARE, Sept 16 (Reuters) - A Russian consortium including arms conglomerate Rostec have partnered to develop a $3 billion platinum mining project in Zimbabwe, the single biggest investment in the country since independence in 1980.

The government of President Robert Mugabe has been shunned by the West for over a decade over alleged human rights abuses and it has turned to China, Russia and other emerging powers for aid, trade and investment.

Aside from the mining deal in the country with the world’s second-largest platinum reserves, there was talk of weapons.

Zimbabwe’s defence minister Sydney Sekeramayi and army commander Constantine Chiwenga held talks on Monday with officials from Rosonobornexport, a Russian state agency responsible for the import and export of military hardware.

Sekeramayi told state radio that the country had not been able to buy spares for military equipment because of Western sanctions.

“They have been briefing us on what they have and we were also advising them on what we may need,” Sekeramayi said.

“As you know, our defence forces have been equipped largely with weaponry from Britain and other Western countries and we are under sanctions from these countries and we cannot even buy spare parts from them and naturally we have to look elsewhere.”

State-owned Rostec owns companies including Kalashnikov, the maker of the Ak-47 assault rifle.

Russian bank Vnesheconombank and industrial group Vi Holding are also involved in the platinum project, which at $3 billion equals over 20 percent of Zimbabwe’s gross domestic product.

ECONOMY BRAKES

The project, which would include a mine, concentrator and smelter, is located near Harare and comes at a time when economic growth has been slowing after expanding at a blistering pace in the past few years.

That rapid growth followed a decade of contraction and the government is keen to get the ball rolling again as the jobless rate remains close to 80 percent.

On Tuesday Mugabe, alongside Russia’s Foreign Minister Sergei Lavrov, oversaw the signing of an agreement to develop what is expected to become Zimbabwe’s largest platinum mine.

Ministry of mines officials said the consortium, which will include Zimbabwean investors, will be called Great Dyke Investments.

Officials did not give details on the shareholding structure but Mugabe has in the past said Zimbabweans would derive their shareholding from the value of mineral resources underground - which usually means they don’t have to contribute capital.

Vnesheconombank is lead financier for the deal which will target production of 250,000 ounces annually within three years.

A presentation by Zimbabwe’s ministry of mines showed the mine would have peak annual output of 800,000 ounces in 2024.

Mines Minister Walter Chidhakwa said the mine had a life of 20 years, but this could be extended to 34 years with further exploration. He said Zimbabwe’s current annual platinum production stood at 430,000 ounces.

The world’s two largest platinum producers, South Africa-based Anglo American Platinum and Impala Platinum, already have platinum operations in Zimbabwe. (Editing by Ed Stoddard and Susan Thomas)

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