Rio’s assets include the world’s largest producer of pink diamonds, the Argyle mine in Australia, plus shares in three other mines and polishing operations in Australia. According to a report in The Wall Street Journal, Rio’s diamond operations generated 11.7 million carats in 2011, but net income fell to $682 million from $727 million in 2010 as costs rose significantly and volumes fell at Argyle.
One company seeking to expand its diamond business is Anglo American plc (OTC: AAUKY), which expects to close its $5.1 billion purchase of an additional 40% of DeBeers later this year.
Rio’s diamond assets are carried on the company’s books at a value of $1.17 billion, but one analyst told the WSJ that a value of less than $1 billion is more reasonable, given that Rio has yet to complete a project in India and that the company’s Zimbabwe mine has “minimal value.”
Rio’s shares are up about 1.4% in the pre-market this morning at $54.06 in a 52-week range of $40.50-$74.99.
Paul Ausick
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