Rio Tinto to keep diamond mines

The company said it had also decided not to pursue an initial public offering of its diamond unit, Bloomberg reported yesterday, citing Rio Tinto Diamonds and Minerals chief executive Mr Alan Davies.

Rio Tinto’s diamond unit, the world’s third-biggest producer of rough diamonds, was said to be worth about US$2,2 billion, according to an evaluation report by Deutsche Bank AG in March this year.

“It is clear the best path to generate maximum value for our shareholders is to retain these businesses,” said Mr Davies.
The London-based company had been considering selling the assets since March 2012 and hired Morgan Stanley to oversee an IPO of the gem unit, reports said. Rio Tinto’s new chief executive, Mr Sam Walsh, this month hosed down expectations for a sale of the diamonds unit, amid speculation the company was going to float the business after failing to find a buyer.

“This is not market day at the bazaar. I would be quite happy to keep it,” Mr Walsh was quoted as saying in an interview with The Daily Telegraph.
Rio Tinto has a 100 percent stake in Argyle Diamond Mine in Western Australia, 59 percent in the Diavik Diamond Mine in the Northwest Territories of Canada and 78 percent in Murowa Diamonds in Zimbabwe.

The three mines combined have produced 12 percent the world’s annual output of rough diamonds. Rio Tinto said last year it was reviewing its diamond business and would consider selling it, as it focuses on expanding in more profitable commodities such as iron ore, copper and uranium.

Other miners have also looked to scale back or eliminate their diamond exposure. In April this year, BHP Billiton Ltd finalised the sale of its Ekati mine in northern Canada for US$553 million to Dominion Diamond Corp, formerly Harry Winston Diamond Mines, ending its involvement in the diamond interest.

Dominion’s other producing asset is a 41 percent stake in the Diavik mine, in which Rio has 59 percent. Rio’s diamond unit reported a US$43 million loss in 2012, down from a profit of US$10 million a year earlier. Diamond production decreased 4 percent year-on-year to 3,24 million carats for the first quarter ended on 31 March, 2013. – Business Reporter/Wires.