Diamond IPO an option as Rio fails to find buyer
Rio hired Morgan Stanley to oversee an IPO in London, a source said. The London-based company was still open to offers for the operations, the person said.
Rio has been considering divesting the assets since March last year, saying they no longer fit with its strategy.
The potential move follows rival BHP Billiton in April offloading its 80 per cent stake to specialist diamond company Harry Winston for $US500 million.
The Rio unit, the world's third-biggest producer of rough diamonds with mines in Canada, Australia and Zimbabwe, might be worth about $2.2 billion, Deutsche Bank said in recent report.
Rio Tinto has also announced the potential sale of its Pacific Aluminum unit and is seeking to sell its Canadian iron ore operations.
David Luff, a Melbourne-based spokesman for Rio, did not immediately return a phone message seeking comment. Nick Footitt, a spokesman for Morgan Stanley in Hong Kong, also did not immediately return calls seeking comment.
The decision on a whole or partial sale of the diamond operations or a separate listing would depend on which offers the most value to its shareholders, Alan Davies, chief executive of diamonds and minerals, said in April.
Rio, the world's second-largest mining company, is working on asset sales as well as cutting staff as waning global demand for commodities is crimping revenue across the sector.
BHP and Rio, which together accounted for about 16 per cent of global diamond output by value, have failed to match the output of industry leaders De Beers and Alrosa of Russia.
Prices for rough diamonds rose 24 per cent last year after two consecutive annual gains of 32 per cent as producer output struggled to keep pace with consumption.
"The market has positive fundamentals, with maturing mines and growing Asian demand," a recent report by brokerage Nomura said.
Frequently Asked Questions about this Article…
Rio Tinto is pursuing an initial public offering (IPO) of its gem unit — the world's largest supplier of natural coloured diamonds — after failing to find a buyer. The company has hired Morgan Stanley to oversee a potential London listing, while remaining open to direct offers for the operations.
Rio has been considering divesting the diamond assets since March of last year because it says they no longer fit with the company's strategy. The move is part of broader asset sales and cost-cutting as waning global demand for commodities has pressured revenue across the sector.
Deutsche Bank recently estimated that Rio Tinto's diamond unit might be worth about US$2.2 billion, according to the article. That valuation is one benchmark investors and advisers may consider as Rio evaluates sale or listing options.
Rio Tinto hired Morgan Stanley to oversee the possible IPO in London. The company remains open to offers and may decide on a whole or partial sale, or a separate listing, based on which option delivers the most value to shareholders.
Rio’s diamond unit is the world’s third-largest producer of rough diamonds and has mines in Canada, Australia and Zimbabwe. Along with BHP, Rio accounted for about 16% of global diamond output by value, though industry leaders De Beers and Russia’s Alrosa produce more.
Rough diamond prices rose 24% last year following two consecutive annual gains of 32%, according to the article. Brokerage Nomura noted positive fundamentals in the market, pointing to maturing mines and growing Asian demand as key drivers.
The article notes that rival BHP Billiton recently sold an 80% stake in its diamond business to specialist Harry Winston for US$500 million. That transaction is part of a broader reshaping of major miners’ diamond portfolios and provides context for Rio’s consideration of sale or listing options.
Investors should watch for formal announcements from Rio about the IPO timeline or any sale agreements, valuation details (such as independent estimates like Deutsche Bank’s), and management commentary on how proceeds would be used. Also monitor broader commodity demand trends and diamond price momentum cited by brokers like Nomura, since these factors affect the attractiveness and valuation of the diamond unit.
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