Canadian partner eyes Rio diamonds

ONE of the world's leading diamond companies has flagged interest in buying Rio Tinto's stake in a Canadian mine, giving Rio hope that plans to divest its diamond assets are finally gaining traction.

North American diamond group Harry Winston is Rio's joint venture partner in the Diavik mine, and has flagged interest in lifting its 40 per cent stake to 100 per cent if a deal could be struck with Rio.

"We are aware that Rio Tinto wants to sell its 60 per cent interest in the Diavik mine where we already own the 40 per cent, that's an obvious one for us to look at as long as the price is right," said Harry Winston's chief executive, Robert Gannicott.

Just two months ago, Harry Winston paid $US500 million to BHP Billiton for its 80 per cent stake in another Canadian diamond mine known as Ekati.

BHP and Rio have sought to exit the diamonds sector - despite the fact diamonds are expected to be a lucrative business in the years ahead - on the grounds that it is too small a market for them to be involved in.

The production report released by Rio suggests Diavik continues to perform well, having produced 4.33 million carats of diamonds in 2012 compared to 4 million in 2011.

Harry Winston on the other hand is a diamond specialist, and has traditionally had exposure to all stages of the diamond production chain: from mines, through to processing facilities, to the stores in which the stones are sold.

The company announced plans to divest its watch and jewellery division to "Swatch Ag" for $US750 million, and Mr Gannicott said that revenue would create the headroom for further acquisitions.

"We will be looking for other things to do," he said.

Rio's diamond assets have been in the shop window for about 10 months now, but a sale has proved elusive.

The diamond division includes the Argyle mine in Western Australia's Kimberley region and a majority stake in a Zimbabwean mine.