Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Global miner Rio Tinto PLC has no plans to take full control of its Canadian Arctic diamond mine, which faces closure and will cost hundreds of millions of dollars to clean up, court documents show.
Rio, which owns 60% of the Diavik mine in Canada’s Northwest Territories, said in a May 28 court filing that it “does not seek to bid” for Dominion Diamond Mines ULC’s 40% stake or its nearby Ekati mine as part of a court-supervised auction.
Rio did not immediately respond to an email.
Dominion, owned by the Washington Companies, filed for creditor protection in April, citing disruption to the global diamond trade caused by the novel coronavirus pandemic.
In May it signed a letter of intent to sell its Diavik interest and Ekati mine to a company controlled by its current parent, the Washington Companies, for $126 million. That deal is subject to a court-supervised bidding process.
Washington Companies paid $1.2 billion in 2017 to acquire the assets.
Diamond prices, which had already been hit by lower demand from the world’s largest consumers, China and the United States, suffered another blow as global lockdowns kept shops closed for months during the virus outbreak.
One of the world’s biggest diamonds producers, Rio Tinto also faces the looming closure of its Argyle mine in Australia, known for extremely rare pink diamonds, at the end of 2020. The 37-year-old mine has produced more than 825 million carats of rough diamonds since it began production.
Diamonds make up less than 2% of Rio Tinto’s net earnings, compared with more than 60% from iron ore.
Diavik produced 6.7 million carats in 2019 but is scheduled to close in 2025, with cleanup costs estimated at $365.3 million, according to court documents.
(By Jeff Lewis and Clara Denina; Editing by Franklin Paul and Steve Orlofsky)
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