Rio Tinto plans diamond division spin-off
03 June 2013
Global mining giant Rio Tinto is moving ahead with plans to spin-off its diamond division through one of the largest initial public offerings (IPOs) in London this year which will create the world's third-largest diamond producer, Sky News reported yesterday.
Citing sources, the news agency said that Rio Tinto and its US adviser Morgan Stanley are drawing up plans to raise approximately £250 million ($380 million) by issuing new shares in the diamond business.
The listing of the diamond division, which has been given a code name 'Project Aurora' could take place as soon as the autumn of this year, the sources said.
Analysts estimate the value of Rio Tinto's diamond business at approximately $5 billion.
UK and Australia-listed Rio Tinto has diamond assets in Australia, Canada, India and Zimbabwe.
Its Argyle mine in Western Australia is the world's largest diamond mine by volume, although not by value due to low proportion of gem-quality stones. The mine produces over 90 per cent of the world's rare pink diamonds, and the company has a cutting and polishing factory in Perth for diamond processing.
In India, the company has diamond exploration projects in Bunder in Madhya Pradesh, where it has discovered a cluster of eight diamondiferous pipes.
The Murowa mine in south-central Zimbabwe is a production mine since 2004.
In Canada, Rio Tinto owns a 60-per cent stake in Diavik diamond mine in Northwest Territories in a joint venture with Dominion Diamond Corp. Recent reports suggest that the company is interested to sell its stake in Diavik to its partner.
Some people close to Rio Tinto said a floatation of the diamond business was looking increasingly likely after a process to identify an outside buyer failed to produce a compelling offer.
Rio Tinto, like other mining giants BHP Billiton, and Anglo American have cut capital expenditure plans due to slump in commodity prices and company's mounting debt.
Chief executive Sam Wash has been trying to reduce the company's debt burden through various means which also included a possible sale or public offering of the diamond division.
A listing of the business would be expected to see the miner dispose of its stake in several lots, according to sources.
The flotation is not certain and would be ditched if Rio could elicit a sufficiently high offer from a bidder, they further said.
Rio Tinto declined to comment on the pans for its diamond mining business.