‘Bad Time to Sell Diavik,’ According Rio Tinto Chief

Prices of rough diamonds have fallen more than 50 percent in some categories, suffering more than other commodities, said Rio Tinto Chief Executive Tom Albanese during a conference call broadcast from the BMO Capital Markets Ltd offices in London on Thursday.

Albanese said that Rio Tinto remains committed to the diamond sector and that now would be a bad time to sell Rio Tinto’s 60 percent interest in Diavik. The announcement comes just a week after Harry Winston Diamond, which holds the remaining 40 percent, announced an agreement to sell 22.5 percent of its holding to Kinross Gold Corporation for $104.4 million. The gold miner will have a 9 percent holding in the Canadian diamond mine.

The Rio executive reiterated previous statements that underground development has been slowed at Diavik and Argyle, an outcome of decreased demand for rough diamonds.

Rio Tinto recently announced the results of an order of magnitude study conducted at the Bunder Exploration Project in India, where 8 lamproites have been discovered.

The study indicated that the Atri pipe is amenable to conventional open pit mining and diamond processing technology. An Inferred Resource of 37 million tons at a grade of 70 carats per ton (cpht) for 27.4 million carats was recently announced.

The Rio statement did not include projected diamond price values, only saying that an evaluation was made.

BMO quoted press reports of potential government royalties of only $19 million a year, saying that a 3.5 million carat per annum production rate suggest that diamond values are around $180 per carat.

Rio’s diamond mining comprises of the Diavik Diamonds mine in Canada, the wholly owned Argyle mine in Australia and the Murowa mine in Zimbabwe. Production at Murowa, where Rio holds a 78 percent stake started in 2004.