Rio Tinto’s Diamond Earnings Plummet while Overall Income Hits Record Levels

Despite a third consecutive year of overall record earnings, London-based mining giant Rio Tinto reported 2006 income from its diamond product group dropped 27 percent compared to 2005 to $205 million.

CEO Leigh Clifford attributed the decrease to “a downturn in the rough diamond market in the second half of 2006.” At the company’s annual shareholders meeting in London Friday, Clifford said that the downturn caused Rio Tinto to “withhold a quantity of rough diamonds from sale during the year.”

Rio Tinto Chairman Paul Skinner reported underlying earnings of more than $7 billion in 2006, up 48 percent from 2005, he said. Describing the company’s overall performance, he told shareholders that cash flow increased by 35 percent in 2006 to $11 billion.

The company’s copper mining operations, accounting for approximately half of its underlying earnings in 2006, was the most profitable with earnings in that sector surging 84 percent to $3.562 billion. Income from Rio Tinto’s gold mines rose 36 percent thanks to higher gold prices.

The construction of a second dike at the company’s Diavik diamond mine in northern Canada was reported to be on schedule, while feasibility studies for underground mining there were said to be continuing.

Rio Tinto owns three diamond mines: 60 percent of Diavik in Canada, Argyle in Australia and Murowa in Zimbabwe.