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Argyle Joint Venture -- The Partners
Aug 10, 1998 10:44 AM
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By Daniel Parker
The Argyle diamond mine, located in the Kimberley area of North West Australia, is the world’s largest diamond producer, providing around one third of the world’s annual supply. The mine is owned by three separate entities: The Rio Tinto Company, Ashton Mining, and the Western Australian Diamond Trust. The following is a brief description detailing the history and functions of each.
The Rio Tinto Company, in its modern incarnation, was created in 1995 by the unification of the Rio Tinto Zinc Corporation PLC (RTZ) and Conzinc Riotinto of Australia Limited (CRA). With 94 sites in 23 countries, the company, dedicated to the mining, processing and exploration of mineral resources, is one of the largest of its kind in the world.
The original Rio Tinto was formed in 1873 for the purpose of reopening the ancient copper workings at Rio Tinto in Spain. Two-thirds of the company’s Spanish business was sold in 1954 and the remaining interest was subsequently divested. The Consolidated Zinc Corporation was incorporated in 1905 to treat zinc bearing tailings at Broken Hill in New South Wales, Australia but soon expanded into mining.
In 1962, the two companies merged to form RTZ, which began developing copper, tin and uranium projects in Europe and Africa. By 1985, the company held significant interests in cement, chemicals, oil, gas and manufactured products for the construction and automotive industries.
Meanwhile, CRA expanded greatly through ventures into gold, coal and diamonds at Argyle. Since the 1995 merger, the joint company, Rio Tinto has expanded even further, including a controlling interest of 57 percent in the Argyle joint venture.
Today the company operates a product group management structure, under which it separately builds upon six global product businesses:
Aluminum—Interests are almost entirely through Comalco and Hamersley Iron in Australia.
Copper—The company holds interests spanning five continents including Kennecott (U.S.), Escondida (Chile), Palabora (South Africa), and Neves Corvo (Portugal).
Energy—Seven coal operations in the U.S., Novacoal and Coal & Allied Industries in Australia. Also Indonesia, Namibia and South American interests.
Industrial Minerals—Argyle Diamonds falls under this category due to the large quantity of industrial quality smalls produced there. Also talc, iron and titanium interests in the U.S., Europe, Canada and South Africa.
Iron Ore—Rio Tinto comprises wholly owned subsidiaries, partly owned subsidiaries and nonmanaged, associate companies in which public shareholders, other companies or governments are partners.
Gold and Other Minerals—Gold interests across four continents including Kelian (Indonesia), Lihir (Papua New Guinea) and Peak (Australia) gold mines. The company also has interests in operations in Zimbabwe, Brazil, Bolivia, Norway and the United Kingdom.
The company’s strategy is to focus on large scale, long life and cost competitive mining operations and to invest throughout their lives in order to maintain competitive positions. Each project is geared toward long-term economic value, therefore the company is constantly seeking to improve the efficiency of its projects.
In conjunction with this philosophy, the company maintains that exploration programs are a cost effective way to add new mineral resources to its mining portfolio. Among its diamond exploration ventures is the Diavik Diamond Project, located at Lac de Gras in Canada’s Northwest Territory. Prefeasibility studies of the property estimated that the rate of diamond production would be six to eight million carats per year for the first 15 years, with more than 90 percent of production by value yielding gem quality diamonds. The project is expected to go on line in 2001.
Inside Ashton
Ashton Mining is a major diamond producer and an international diamond explorer.
The company’s interest in diamonds goes back to 1972, when five companies agreed to participate in a $100,000 exploration program at Kalumburu in Australia. One of the companies was A.O. (Australia) Pty Limited, the Australian subsidiary of the London Tin Corporation Limited, which became part of Malaysia Mining Corporation Berhad (MMC) in 1976.
In 1978, most of AO’s interest in the joint venture was transferred into a new company, Ashton Mining Limited. MMC initially retained a 60 percent interest in Ashton, but this has since been reduced to the current level of 47 percent.
Ashton, which was incorporated as a public company in Victoria in July 1978, has expanded its mining and exploration projects to include Argyle, Aurora Gold and exploration interests throughout the world. But its 38 percent interest in Argyle Diamonds is its primary venture. The company owns an additional 5 percent through its wholly owned subsidiary, Western Australian Diamond Trust (WADT).
A Big Hand in Merlin
The company’s primary development interests include a 77.4 percent stake in the Merlin project in Australia’s Northern Territory. Stage one, expected to commence this year, will involve trial mining by open pitting the four pipes already bulk sampled. Ore grades during stage one are expected to average approximately 0.43 carats per ton and revenue is anticipated to be approximately $18 to $22 million per year.
Ashton also has its hand in the diamond-rich Cuango area of Angola. The company holds a 33.3 percent interest in the Cuango Diamond Project, at which operations are expected to commence this year. Although the company has not yet projected the quantities present at the sight, diamonds in the Cuango River region are typically valued at between $200 and $350 per carat.
The company is also trial-mining at the Cempaka Alluvial Diamond Project in Indonesia. The channels being dredged contain some 260 million cubic meters of resource and are known to contain high quality gem diamonds.
Recent exploration projects include areas in Karelia, the Sahara Desert in Mauritania, Mali, Botswana, Angola, Indonesia, South Africa and Australia.
North American Interests
In October 1993, Ashton Mining of Canada, Inc. (AMCI) was listed on the Toronto and Montreal stock exchanges and has been developing North American exploration interests since. Ashton holds a 61 percent interest in AMCI. The most encouraging exploration results in 1997 came from AMCI’s Buffalo Hills property in northern Alberta, where a $6.8 million exploration program is underway.
In 1993, Ashton consolidated all of its gold interests within Aurora Gold Ltd., which became a separately listed company in October of that year. Ashton retains a 35 percent interest in Aurora, which manages and owns 90 percent of the Mt. Muro gold and silver mine in Kalimantan, Indonesia. This mine produced a record 241,458 ounces of gold in 1997.
WADT: The Smallest Piece of the Pie
The Western Australian Diamond Trust (WADT) is a passive holder of five percent of the Argyle joint venture. The trust is owned by Rio Tinto (57 percent), Ashton (38 percent) and other shareholders (3 percent), and managed entirely by Ashton. WADT, which was developed from entities associated with the Argyle joint venture from before mine development, was floated on the Australian Stock Exchange in the mid- 1980’s. Ashton and Rio Tinto mounted a takeover for it in 1989 when the two companies developed their current Argyle ownership levels.
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Tags:
Angola, Argyle, Australia, Diavik, Gem Diamonds, Guinea, Namibia, Production, Rio Tinto, South Africa, Zimbabwe
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