Diamonds aren't forever, Rio Tinto mulls divestment

Multi-metal mining titan Rio Tinto is thinking about offloading its diamond interests and has begun a strategic review of the business.

Rio, which currently has interests in diamond mines in Australia, Canada, Zimbabwe and India, said that its strategy is to operate "large, long-life, expandable assets."

"The diamonds market outlook is very positive, with demand growing strongly and lack of new discoveries limiting supply. 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," said Harry Kenyon-Slaney, the Chief Executive of Diamonds & Minerals.

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Diamond production fell by 15% in 2011, while underlying earnings at the Diamons & Minerals division declined by 23% to $252m. The group saw net impairments of $344m relating to its diamond businesses during the year, mainly as a result of changes in assumptions about future capital costs at one project.

The company said that its strategic review includes exploring a range of options for potential divestment of the assets.

"This process may take some time. We're committed to keeping stakeholders informed about any key developments, and in the meantime are reassuring employees and the governments in the states and countries where we operate that it is very much business as usual."

BC