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 IPO of its gem unit after failing to find a buyer for the operations. The company has been considering divesting the assets since March last year, saying they no longer fit with its broader strategy, and has hired Morgan Stanley to oversee a possible London listing while remaining open to offers.
A London IPO would separate Rio Tinto's diamond operations into a publicly listed business, allowing the market to set a valuation and giving investors direct exposure to the gem unit. Rio says the choice between a whole or partial sale or a separate listing will depend on which option delivers the most value to shareholders.
Deutsche Bank estimated Rio Tinto’s diamond unit might be worth about $2.2 billion. As a comparator, rival BHP sold an 80% stake in its diamond operations to Harry Winston for US$500 million in April.
Rio’s gem unit is described as the world’s third-biggest producer of rough diamonds, with mines located in Canada, Australia and Zimbabwe.
Both Rio and BHP have been reducing exposure to diamond assets. BHP offloaded an 80% stake to specialist diamond company Harry Winston for US$500 million in April. Together, BHP and Rio account for about 16% of global diamond output by value, but they still trail industry leaders De Beers and Alrosa.
Rough diamond prices rose 24% last year, following two consecutive annual gains of 32%, as producer output struggled to keep up with consumption. Brokerage Nomura noted positive market fundamentals driven by maturing mines and growing Asian demand.
Rio Tinto hired Morgan Stanley to oversee a possible IPO in London. Rio has indicated it will weigh offers and the option of a separate listing based on which approach delivers the best value to shareholders; Alan Davies, Rio’s chief executive of diamonds and minerals, has commented on that decision framework.
Yes. Rio has announced potential sale of its Pacific Aluminum unit and is seeking buyers for its Canadian iron ore operations. The company is also cutting staff as waning global demand for commodities is putting pressure on revenue across the sector—moves that could affect Rio’s overall strategy and future capital allocation.
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