Rio Tinto Diamonds Posts $10M Loss for H1
August 04, 11
 Rain and lower grade at Argyle (above) harmed Rio Tinto. An underground project aims to restore production |
Gross revenues declined by 4% to $313 million and earnings before interest, taxes, depreciation and amortization (EBITDA) fell by a third to $50 million.
The company's diamond unit posted a $10 million net loss compared with a $34 million profit in the first half of 2010.
In the period, RTD mined 5.23 million carats, a 26% decline. Average earning per carat rose 30.4% to $59.82 as demand and prices for diamonds improved significantly.
However, significant rainfall and lower grades at Argyle, unfavorable exchange rates and increased costs, including the impact of higher unit cash costs from lower production volumes dragged the bottom line into the red.
Diavik production is expected to increase in the second half as underground production increases.
In 2011, Rio Tinto expects its share of production to be 13 million carats, a decline from the 13.8 million carats mined in 2010. The company further stated that global supply of rough diamonds is forecast to remain at best flat over the next decade, with the potential for a decline if no new discoveries are found and developed.
Rio Tinto approved a $1.6 billion underground expansion project at Argyle that will elevate the expected supply constriction.
Originally approved in 2005, project was slowed in 2009. The remaining $803 million to complete was approved in September 2010. The underground is expected to be fully operational in 2013 with targeted production in excess of 20 million carats a year. It will extend the mine life to at least 2019.
For the entire Rio Tinto group, the company reported record first half net earnings of $7.6 billion, 30% above 2010 first half.
Rio Tinto's diamond interests include Argyle (100%), Diavik (60%) and Murowa (77.8%).