With diamonds losing their sparkle, Rio Tinto, the world's third-largest diamond miner is following rival BHP Billiton in exiting the diamond business by inviting bids for its portfolio of diamond mines.
The Anglo-Australian miner, which mined 11.7 million carats of diamonds last year, today said that it would review its diamond business and would consider divesting its diamond mines in Australia, Canada, India and Africa, in order to focus on expanding in more profitable commodities such as iron ore, copper and uranium.
Harry Kenyon-Slaney, chief executive of Rio Tinto's Diamonds & Minerals, said "We regularly review our businesses to ensure they remain aligned with Rio Tinto's strategy of operating large, long-life, expandable assets.''
Rio Tinto, the third-largest diamond producer behind De Beers of South Africa and Russian state-owned Alrosa, operates three diamond mines, the fully-owned Argyle mine in Australia, the Diavik mine in Canada in which it holds a 60 per cent interest, the Murowa mine in Zimbabwe, where it holds 78 per cent interest, and the fully owned Bunder advanced diamonds project in India.
The value of Rio Tinto's diamonds business on its books is $1.2 billion, but analysts say that the business may fetch around $2 billion.
Rio Tinto, which produces around 15 per cent of the world's diamonds by volume, has seen its earnings from diamonds drop by 86 per cent to $10 million last year on revenue of $727 million, mainly due to lower production and higher costs at its open-pit Argyle mine, which is undergoing a $2.1 billion underground expansion. BHP Billiton late last year said that it would review its diamond assets and examine whether its presence in the diamond industry is consistent with its strategy of investing in expandable assets. The diamonds and speciality products division accounted for around 2.5 per cent of its 2010 operating profit.
It then sold its entire majority stake in the Chidliak exploration project in northern Canada to joint venture partner Peregrine Diamonds, for C$9 million ($8.7 million) and is still seeking a buyer for its 80 per cent interest for the Ekati mine in Canada, which is worth around $740 million.