Monday, June 24, 2013

Buyers fail to take a shine to Rio Tinto’s diamonds arm

Diamonds are forever for mining giant Rio Tinto, which today scrapped plans to sell or float its  $2 billion (£1.3 billion)  precious stones division.

The world’s third-biggest miner had been looking to offload its diamonds business as part of plans to trim its $19 billion net debts, and boost returns to shareholders. Chief executive Sam Walsh had promised investors “significant cash proceeds” from asset sales, and Rio said in March that it was “reviewing whether we can create more value through a different ownership structure” of its diamonds business.
But today the miner’s diamonds and minerals chief executive Alan Davies admitted no deal had emerged. “After considering a number of alternative strategic ownership options, it is clear the best path to generate maximum value for our shareholders is to retain these businesses,” he said.
“The medium to long-term market fundamentals for diamonds remains robust, fuelled by growing demand for luxury goods in Asia and continuing strong demand in North America.  We have valuable, high-quality diamonds businesses that are well-positioned to capitalise on the positive market outlook.” Rio Tinto produces about 12 per cent of the world’s diamonds, from mines including Argyle in Western Australia,  which is the largest source of rare pink diamonds.
Rivals have also failed to seal deals as commodity prices languish. African Barrick Gold could not complete a stake sale to China National Gold in January, and Brazil’s Vale gave up its attempt to sell Australian mines. But rival BHP Billiton successfully sold its diamonds unit to Harry Winston, now called Dominion Diamond, last November.
While BHP has racked up more than $4.6 billion in asset sales in the past year, Rio has only managed to sell its Eagle nickel mine for $325 million.

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