Rio Tinto Diamonds Posts $68 Million Loss

A 46.4 percent drop in Rio Tinto’s diamond sales resulted in a $68 million loss for the company in 2009, the miner recently reported. Sales dropped to $450 million and production fell 33 percent to 14.026 million carats for the full year. Rio Tinto pinned the loss on lower prices and lower sales volume.

The average price per carat (p/c) for Rio Tinto’s diamonds declined to $32.08 p/c compared to $40.35 p/c in 2008.

“Both prices and sales volumes for diamonds have been severely impacted by the global economic downturn,” Rio Tinto stated. “The effect on the rough diamonds market has been exacerbated by the lowering of inventory levels in the diamond pipeline, resulting from reduced global liquidity.”

The Diamonds & Minerals business weighed heavily on Rio Tinto’s bottom line. Of the group’s total post-tax impairment charge of $1.57 billion, $525 million relates to the group’s diamond segment.

Rio Tinto's diamond assets comprise the Argyle mine in Australia, the Diavik mine in Canada in which holds a 60 percent stake and a 77.8 percent share in the Murowa mine in Zimbabwe.

Expenses included the development of the underground diamond mines at Diavik and Argyle. Rio Tinto set aside $800 million for the Diavik project, which expects to begin underground production this year.

At Argyle, where a budget of $1.5 billion has been approved for the underground expansion project, some $100 million is expected to be spent this year. The project has slowed down, however, due to “critical development activities,” the miner reported, and is being reviewed “to determine the appropriate ramp-up timing.”

In related news, Clark McEwen, a veteran diamond industry marketing manager, has been named marketing manager of Rio Tinto Diamonds, effective March 1. The appointment is part of a wider change in the company's sales and marketing management team.