Photo courtesy of Rio Tinto.
When it shut down the massive Argyle mine in Western Australia toward the end of 2021, many in the industry predicted that Rio Tinto, the Anglo-Australian multinational that is the world’s second-largest metals and mining corporation behind BHP, was getting out of the diamond business. The company had perennially held the number three spot, after De Beers and Alrosa.
But a number of developments toward the end of the year would suggest otherwise. The first was its announcement in November that it had completed a transaction to acquire Dominion Diamond Mine’s 40 percent share in the Diavik diamond mine, located about 300 kilometers northeast of Yellowknifeת n Canada’s Northwest Territories.
Rumors about a pending deal had been swirling around for some time, with Rio Tinto earlier indicating that it was not interested in any part of Dominion Diamond Mines. The latter company had filed for insolvency protection in April 2020.
Ironically, it is Dominion that is now out of the diamond business. Formerly operating as Harry Winston and Aber, the Canadian specialist diamond mining company once held a 40 percent stake in the Diavik Diamond Mine Project, and in 2012 it purchased all of BHP’s diamond assets, with one being the Ekati Diamond Mine, adjacent to Diavik.
In June 2020, when it reportedly was close to collapse because sales had stalled so severely during the COVID-19 pandemic and its debts increased to $1.2 billion, Dominion sold the Ekati Mine to a new company named Arctic Canadian Diamond Company. It retained its stake in Diavik, but that now ended with this later development
An aerial shot of the Diavik mine in Canada’s Northwest Territories. Photo courtesy of Rio Tinto.
GOOD NEW FOR CANADA’S NWT
In its November press release, Rio Tinto said it had purchased all remaining Diavik assets held by Dominion, including unsold Diavik production and cash collateral held as security for Diavik’s future closure costs.
“In return, Rio Tinto has released Dominion and its lenders from all outstanding liabilities and obligations to fund the operations or closure of the joint venture,” the press release noted.
The news of the purchase was welcomed in the Northwest Terrirories, where there had been considerable concern about job losses Diavik went under with Dominion.
But in an email sent to the Canadian Broadcasting Corporation, Rio Tinto said that Diavik will continue to operate as normal.”
In its press release, Rio Tinto’s chief executive of minerals Sinead Kaufman said that Diavik will “now move forward with certainty” while “making a significant contribution to the Northwest Territories.”
It is important to note, nonetheless, that the Diavik mine is scheduled to close in 2025.
PROMISING PROJECT IN SASKATCHEWAN
Rio Tinto’s intention to remain a part of the diamond mining sector was confirmed on December 9, when it announced that it had settled as dispute with the Star Diamond Corporation, according to which they will be able to advance the development of a diamond extraction operation in Saskatchewan, Canada.
The project, also known as Project FalCon, could produce 66 million carats over 34 years, according to a 2018 preliminary economic assessment.
According to the agreement, all expenditures on Project FalCon prior to December 31, 2021, will be the sole responsibility of Rio Tinto’s subsidiary, Rio Tinto Exploration Canada (RETC), and all expenditures between January 1, 2022 and the public announcement of a decision to develop a diamond mining operation will initially be covered by Rio Tinto. Star Diamond will not be required to begin reimbursing the Rio Tinto subsidiary until commercial production has been achieved.
In exchange for these amendments, the participating interests in the joint venture were adjusted to 75 percent for RTEC and 25 percent for Star Diamond, from the interests of 60 percent and 40 percent they had stood at respectively.
Prospecting for diamonds in in Saskatchewan, Canada. Photo courtesy of Star Diamond.
The arrangements de-risk the project for Star Diamond and ensure that key project milestones will have been achieved before Star Diamond has to contribute any additional capital, while also providing Rio Tinto with a greater participating interest in the project.
“We are very pleased to have reached a constructive resolution with Rio Tinto that puts our differences in the past, fully aligns our interests and allows both of us to singularly focus on jointly and expeditiously moving forward with what Star Diamond believes is one of the most promising diamond projects in the world,” said Ewan Mason, chairman of Star Diamond.