Mining giant Rio Tinto decided to keep its diamonds business saying market fundamentals look robust. Source: AAP
MINING giant Rio Tinto has taken its diamonds business off the market.
Despite a global push to offload underperforming assets, Rio announced on Monday that it will retain its diamonds businesses following a strategic review.
Analysts say the move indicates Rio was unable to sell its prized Argyle diamond mine or other overseas diamond assets at the price it wanted.
It comes almost two months after the world's second biggest iron ore miner flew representatives of the nation's media to Argyle diamond mine in the remote Kimberley region of WA to show off its operations and open a new underground mine.
The company was understood to have been considering a $2 billion float of diamonds assets in Australia, Canada, Zimbabwe and India.
Dominion Diamond Corporation, Petra Diamonds and De Beers were reportedly interested in Argyle and other assets.
Rio Tinto Diamonds and Minerals chief executive Alan Davies said the company's diamonds businesses were 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," Mr Davies said.
He said the medium to long-term market fundamentals for diamonds remained robust, fuelled by growing demand for luxury goods in Asia and continuing strong demand in North America.
Rio Tinto chief executive Sam Walsh recently said the company was focused on raising funds by selling assets, including diamonds.
In April Rio opened its new $2.2 billion underground diamond mine at Argyle amid predictions it will produce up to 20 million carats per year and extend the overall mine life until 2020.
At the time UBS estimated the value for the entire Rio Tinto global diamond business at $US1.65 billion.
Fat Prophets Resources analyst David Lennox said Monday's announcement was an indication that Rio didn't get the price it wanted.
"They weren't a keen seller, but had they got the price they wanted it would have been sold," Mr Lennox said.
While Rio had bigger problems elsewhere with its aluminium business, the diamonds business would do okay if the diamond index remained relatively stable.
"They've certainly done all they can to ensure that production stays in line, it's just that it is getting more costly and they're not getting significant finds of valuable diamonds," he said.
Argyle produces around 90 per cent of the world's supply of rare pink diamonds and is the world's largest supplier of natural coloured diamonds.
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