Anglo-Australian miner Rio Tinto yesterday approved a $350-million fresh investment to expand its Diavik diamond mine in northwestern Canada, two years after it tried to exit the diamond business.
Development of the A21 kimberlite pipe at the Diavik mine will start next year, London-based Rio Tinto today said in a statement. The development will cost $350 million over four years and production is expected in late 2018, the statement added.
''Our decision to invest in the Diavik A21 project reflects our strong confidence in the diamond sector and in our ability to compete effectively in the industry,'' said, Alan Davies, CEO of Rio Tinto's diamonds and minerals unit.
Rio Tinto owns 60 per cent of Diavik, while Dominion Diamond Corp (earlier known as Harry Winston) owns the remaining (See: Harry Winston in talks to buy Rio Tinto's stake in Canada's Diavik Mine ).
The Diavik A21 is estimated to hold around 3.6 million tons of measured resources at a grade of 2.8 carats per ton, and 0.4 million tons of indicated resources at a grade of 2.6 carats per ton, according to Dominion Diamond.
The Diavik diamond mine, located 300kms northeast of Yellowknife, capital of Canada's Northwest Territories, began production in 2003 and became a fully underground mining operation in 2012. The mine produces mainly gem-quality diamonds which are sold in high end jewellery stores around the world.
Rio Tinto, the world's third-biggest producer of rough diamonds, had said in March 2012 that it would exit the diamond business by inviting bids for its portfolio of diamond mines.
After failing to find a buyer in the depressed global economy, the company last year made plans to spin-off its diamond division through an initial public offering (IPO) and hired Morgan Stanley to draw up plans to raise approximately £250 million ($380 million) in a London listing (Rio Tinto plans diamond division spin-off).
However, given the depressed markets for commodities, it concluded even an IPO was not an attractive option.
The UK and Australia-listed company 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. The company also has a cutting and polishing factory in Perth.
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.
Recent reports had suggested that the company may sell its stake in Diavik to its partner.
Rio Tinto, like other mining giants BHP Billiton, and Anglo American, has cut capital expenditure plans due to a slump in commodity prices and mounting debt.