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No Time Pressure on Rio Tinto Diamond Review

Sep 13, 2012 2:44 AM   By Dilipp S Nag
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RAPAPORT...  Rio Tinto said it’s under no time constraints to decide on the future of its diamond business, ‎stressing that it will review all of its options, including a possible divestment from the industry.‎

The company announced in March that it is considering selling its diamond portfolio, which ‎includes the Argyle mine in Australia, a 60 percent stake in the Diavik mine in Canada, a 78 percent share of ‎the Murowa mine in Zimbabwe and the Bunder development project in India.

Bruce Cox, the managing director of Rio Tinto Diamonds, said in a presentation in Montreal on ‎Wednesday that production from these combined assets are expected to account for 22 ‎percent of global diamond production by 2017, up from 10 percent currently. ‎

Cox forecast that global diamond supply is expected to be flat, or even decline, over the ‎next decade, widening the demand-supply imbalance. He noted there have been no new tier-‎‎1 diamond discoveries during the past 17 years while the existing mines are becoming older ‎and deeper. ‎

He explained that Rio Tinto is well positioned for significant growth as it increases supply at ‎Argyle and Diavik via underground mining at the two mines. The Bunder project is also an ‎important source of future supply, he added.‎

Cox expects that strong industry fundamentals will drive diamond prices higher over the next ‎decade. He noted that emerging markets, mainly China and India, are expected to drive strong ‎demand growth and account for up to 40 ‎percent of the diamond jewelry market by 2020. The U.S. is expected to remain a key market ‎for diamond jewelry, but China is likely to surpass the size of the U.S. market by 2025, Cox ‎added.

Rio Tinto’s diamond production fell 15 percent to 11.7 million carats in 2011, while diamond revenue rose 7 ‎percent to $727 million.‎
Tags: Argyle, Bruce Cox, Bunder, diamond, diamonds, Diavik, Dilipp S Nag, India, mines, Murowa, Rapaport, Rio Tinto, rough, supply
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