Rio Tinto sees rosy future for diamonds despite end of Argyle

Star Diamond

26/09/2019 14:18

* Overall diamond market hit by world economy
    * Pink diamonds have risen in price as store of value
    * Argyle, biggest diamond mine, to close by end of 2020

    By Barbara Lewis
    LONDON, Sept 26 (Reuters) - Rio Tinto  RIO.AX  RIO.L  is
exploring for diamonds in Canada as part of its plans to stay in
the sector despite the looming closure of its Argyle mine in
Australia, known for extremely rare pink diamonds, the firm's
head of copper and diamonds said.
    Demand and prices for the wider market have fallen as
concerns mount about the world economy, and laboratory-grown
gems have added to supply.
    Coloured or particularly large diamonds, however, have held
value, especially pink diamonds, 90% of which are produced by
Argyle. That mine, the world's biggest in carat terms, is
expected to cease production by the end of next year.
    Arnaud Soirat, Rio's chief executive for copper and
diamonds, said pink diamonds had risen in price by 500% since
2000. He gave no figures for the overall market, but producers
have reported lower overall demand and prices.  urn:newsml:reuters.com:*:nL3N2272NY
    Despite the overall bearish backdrop, Soirat said Rio Tinto
planned to stay in diamonds. 
    "Diamonds is a business we like a lot. It's a very
high-margin business in line with our strategy of value over
volume. It makes a lot of sense. We want to stay in the diamonds
business," Soirat said in an interview.
    Rio is exploring in Canada, where it has a 60% interest in
and operates the Diavik Diamond Mine.
    It also has a joint venture with Canada's Star Diamond Corp
 DIAM.TO .
    Rio declines to give separate figures for diamonds but last
year's total exploration spend was $488 million.
    Its gross diamond sales in 2018 raised $695 million and
delivered net earnings of $118 million, compared with group core
profits, dominated by iron ore, of $18 billion.
    Soirat said each pink carat could be worth several million
dollars.    
    He is overseeing one of the last sealed bid tenders, which
offers 64 Argyle pink diamonds and closes on Oct. 9, following
showings to potential buyers in London, New York and Perth,
Australia. Soirat said there could be two more tenders depending
on Argyle's production in its final months.
    The pink diamond tenders have been held annually since 1984.
    Diamond specialists say the pink colour is thought to be
created by a twist within the atomic lattice during formation
more than a billion years ago.
    Other diamond miners, which have long excelled at marketing,
are chasing margins. The world's biggest producer by volume,
Alrosa  ALRS.MM , which also has some pink stones, is marketing
naturally occurring fluorescent diamonds.  urn:newsml:reuters.com:*:nL5N25Q333
    Rebecca Foerster, president of Alrosa in the United States,
the world's leading diamond market, said Argyle's closure should
boost the price of pink stones and help Alrosa achieve "a
significant market share of coloured diamonds", adding that the
impact on the overall diamond market would be limited.   

 (Reporting by Barbara Lewis; Editing by Dale Hudson)
 ((Barbara.hm.Lewis@thomsonreuters.com; +44 207 542 2932;
Reuters Messaging:
barbara.hm.lewis.thomsonreuters.com@reuters.net))