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Researched by Industrial Info Resources Australia (Perth, Australia)--Rio Tinto plc (NYSE:RIO) has decided to subvert its planned sale of a diamond mine in Western Australia, which was meant to fetch an estimated $1.3 billion for the company. It was supposed to be a part of a string of planned sales--including Rio's coal, iron ore and copper assets--that would help the company reduce its net debt of $19 billion. The company had also decided to sell its Clermont and Blair Athol thermal coal mines in Queensland in order to cut further costs and boost shareholder returns.
Continuously weakening coal prices and increasing costs have been affecting company valuation. Sam Walsh, who took over as Rio's chief in January, has been acting quickly in a bid to improve shareholders' return by selling weak assets.
The company is trying to bank on the long-term outlook for diamonds and increasing demand for the luxury goods in Asia and other emerging economies.
"After considering a number of alternative strategic ownership options, it is clear that the best path to generate maximum value for our shareholders is to retain these businesses," said Alan Davies, Rio's diamond and minerals chief executive.
However, many analysts are saying that the inability to find the buyer at the right price in the current market is the major reason behind the deferred sale. Rio Tinto put the mine up for sale in March 2012 after BHP Billiton plc (NYSE:BHP) managed to sell its Canadian diamond mine EKATI to Dominion Diamond Corporation (NYSE:DDC) in November 2012.
The mine in question, Argyle Diamonds Mine, is located in Western Australia's Pilbara region and is now undergoing an expansion. The mine recently completed its underground development and expects to produce 20 million carats per year. The expansion project involves extending the decline and expanding the processing plant ore handling capacity to 9 million tonnes per year. This expansion is designed to extend the mine life to 2020, and the company expects the work to be completed by the third quarter of 2013.
Walsh has set a cost-cutting target of $5 billion by the end of 2014 and is aiming to reduce the company's new exploration activities.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Continuously weakening coal prices and increasing costs have been affecting company valuation. Sam Walsh, who took over as Rio's chief in January, has been acting quickly in a bid to improve shareholders' return by selling weak assets.
The company is trying to bank on the long-term outlook for diamonds and increasing demand for the luxury goods in Asia and other emerging economies.
"After considering a number of alternative strategic ownership options, it is clear that the best path to generate maximum value for our shareholders is to retain these businesses," said Alan Davies, Rio's diamond and minerals chief executive.
However, many analysts are saying that the inability to find the buyer at the right price in the current market is the major reason behind the deferred sale. Rio Tinto put the mine up for sale in March 2012 after BHP Billiton plc (NYSE:BHP) managed to sell its Canadian diamond mine EKATI to Dominion Diamond Corporation (NYSE:DDC) in November 2012.
The mine in question, Argyle Diamonds Mine, is located in Western Australia's Pilbara region and is now undergoing an expansion. The mine recently completed its underground development and expects to produce 20 million carats per year. The expansion project involves extending the decline and expanding the processing plant ore handling capacity to 9 million tonnes per year. This expansion is designed to extend the mine life to 2020, and the company expects the work to be completed by the third quarter of 2013.
Walsh has set a cost-cutting target of $5 billion by the end of 2014 and is aiming to reduce the company's new exploration activities.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
