Rio Tinto Diamonds Posts $68 Million Loss

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

Rio Tinto pinned the loss on lower prices and lower sales volume, a result of the global economic slowdown. A cutback in production at Argyle and Diavik was a measure taken to redress the decrease in global demand.

“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 businesses, caused by weak demand for luxury items and increased input costs.

Rio Tinto's diamonds includes Argyle, Diavik (60 percent stake) and Murowa (77.8 percent).

Expenses include the development of the underground diamond mines at Diavik and Argyle. Rio Tinto set aside $800 million for Diavik in Canada, a project that has been largely completed with first production expected in early 2010.

At Argyle, where a budget of $1.5 billion has been approved for the underground expansion project, some $100 million are expected to be spent in 2010. The project has slowed down due to “critical development activities,” the miner reported, and is being reviewed “to determine the appropriate ramp-up timing.”