PERTH (miningweekly.com) – Diversified giant Rio Tinto has decided to hold fast to its diamonds business, with the miner saying on Monday that a strategic review had concluded that this was the best option.
Rio diamonds and minerals CEO Alan Davies said that it had considered a number of alternative strategic options for the diamond businesses, which includes the Argyle mine, in Australia, the 60%-owned Diavik mine, in Canada, and the 78%-owned Murowa operation, in Zimbabwe, but decided that it would be best for shareholders to retain these operations.
“The medium- to long-term market fundamentals for diamonds remain robust, fuelled by growing demand for luxury goods in Asia and continuing strong demand in North America,” he said.
“We have valuable, high-quality diamonds businesses that are well positioned to capitalise on the positive market outlook,” Davies stated.
London-based Liberum Capital described the announcement as “predictable”.
“Rio was always going to be seeking a relatively punchy price for the assets given its well publicised positive view of the diamond market. In order to pay the $1.5-billion number touted in the press, any buyer would be factoring in a significant improvement in the diamond market and confidence the group could keep costs under control as it moves into a technically difficult block-caving operation at Argyle,” Liberum said.
It added that Rio would also have competed for fairly limited diamond investment capital with the potential initial public offering of Alrosa in the second half of 2013.
Rio Tinto announced the diamond business strategic review in March last year soon after BHP Billiton also announced that its diamond businesses were up for sale. BHP sold its diamond business to Dominion Diamond Corp, formerly Harry Winston, in November.
Rio Tinto’s share of the production from its three operating diamond mines is sold through its sales and marketing headquarters in Antwerp, with representative offices in Mumbai, Hong Kong and New York. It also operates a niche cutting and polishing factory, in Perth, for the rare pink diamonds from its Argyle mine.