MINERAL giant Rio Tinto has reversed its decision to sell out of the diamond trade after announcing the plans in March last year.
Although the company cited “robust” market fundamentals for the move, the business sphere has had mixed reactions regarding Rio’s primary motivation for the strategy change.
Maintaining fully integrated diamond mining units within Australia, Canada, Zimbabwe and India – including mining, cutting and polishing and marketing and sales of the precious stone – Rio Tinto was understood to have been considering a $2 billion float of diamonds assets across these countries.
However, the company announced in late June it would conserve its diamond interests, and pulled its assets from the market arena. Some analysts have interpreted the move as a lack of outsider interest, arguing the company was unable to find a buyer for the right price.
Following a review, Rio Tinto reported a profitable long-term outlook for the diamond market, particularly within Asia and the US. “The medium to long-term market fundamentals for diamonds remain robust, fuelled by growing demand for luxury goods in Asia and continuing strong demand in North America,” Rio Tinto Diamonds and Minerals chief executive Alan Davies said.
“We have valuable, high-quality diamonds businesses that are well positioned to capitalise on the positive market outlook.
“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.” Rio Tinto’s primary Australian asset is Argyle Diamonds in WA’s Pilbara region. A producer of around 90 per cent of the world’s rare pink diamond supply, Argyle pink diamonds reportedly attract an average price 20 times higher than an equivalent white diamond.