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London-based diversified miner Rio Tinto (LON:RIO) is taking a page out of BHP Billiton’s playbook and is looking at selling some or all of its diamond mines.
The company put out a press release today saying it has “begun a strategic review of its diamond business that will include exploring a range of options for potential divestment of its diamond interests.”
BHP Billiton made a similar announcement in November 2011, and soon followed through, selling its 51% stake in the Chidliak exploration property on Baffin Island to Peregrine Diamonds. BHP’s 80%-owned Ekati mine, the oldest in Canada, is for sale and likely to fetch between $300 million and $500 million.
Rio Tinto operates three diamond mines, the 100%-owned Argyle in Australia, 60%-owned Diavik in northern Canada, and Murowa in Zimbabwe, of which it has a 78% interest. Rio also has an advanced diamond project in India.
Harry Kenyon-Slaney, chief executive Diamonds & Minerals, said that Rio Tinto regularly reviews its businesses to ensure they remain aligned with Rio’s strategy of operating large, long-life, expandable assets:
“The diamonds market outlook is very positive, with demand growing strongly and lack of new discoveries limiting supply,” he said in a statement. “We have a valuable, high quality diamonds business, but given its scale we are reviewing whether we can create more value through a different ownership structure.”
Last year Rio Tinto’s diamond business lost $76 million, The West Australian reported, including over $300 million in net impairments relating to capital costs needed to complete the Argyle underground project.
In February Australia’s biggest pink rough diamond was discovered at Argyle, which produces 90% of the world’s pink diamonds.
The 12.76 carat stone was unearthed at the Argyle open pit in the East Kimberley region of Western Australia.
