Rio Tinto diamond revenue hits £260m in H1

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Mining giant anticipates production of 15.7 million carats in 2013.

Rio Tinto has released its underlying financial results for the six months to June 30 2013, with its diamond business’ gross revenue hitting $403 million (£260m), up from 2012’s H1 revenue of $350 million (£226m).

The London-based mining giant’s overall earnings reached $4.2 billion (£2.71bn) in H1, down 18% on 2012, said to be reflective of lower average market prices and a higher effective tax rate, partly offset by record iron ore shipments and cost savings momentum.

Following the company’s decision not to sell its diamond arm, Rio Tinto has reported underlying earnings of $192 million (£124m) for its diamonds and minerals sector in the first half, compared with a loss incurred in H1 2012 of $11 million (£7.1m). Its underlying earnings for diamonds and minerals were 3% lower than H1 2012.

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Rio Tinto owns a 100% stake in the Argyle diamond mine in Australia, 60% in Canada’s Diavik mine and a 77.8% stake in the Murowa mine in Zimbabwe. Its Argyle underground mine commenced production in the first half of 2013 and is said to be "ramping up to full capacity".

The underground mine is set to extend the mine life of Argyle until at least 2020. In 2013, Rio Tinto’s production of diamonds is anticipated to total 15.7 million carats of diamonds.

The company’s chairman Jan du Plessis said: “Our business has demonstrated considerable resilience against a backdrop of continuing market volatility. Cash flows from operations were strong, driven by our cost savings programmes but lower prices and a higher tax rate led to a reduction in underlying earnings to $4.2 billion in the first half of 2013.

“Our strategy to invest in and operate large, long-life, low-cost, expandable operations remains unchanged. Sam [Walsh, Rio Tinto’s chief executive] and his team are seeking to simplify the portfolio through the divestment of non-core assets but only where we can realise value for shareholders. Our interim dividend increased by 15 per cent, in line with our policy and reflecting the increase in our 2012 full year dividend.”

Rio Tinto’s chief executive Sam Walsh said the company has been focused on improving performance across the group at all of its mining locations with cost saving programs put into place to help reduce costs and preserve margins, even in a climate of lower prices.

He said: “The medium-term economic outlook remains volatile with a broader range of outcomes now possible. Chinese economic growth has decelerated so far this year and is unlikely to recover significantly in the second half, but we do not expect a hard landing.

“This global economic volatility only serves to highlight the need to build a stronger and more resilient business. We have reduced capital expenditure from the peak level of last year and we expect it to be 20% lower in 2013.

“We have made steady progress in improving our portfolio this year, with $1.9 billion of divestments announced or completed to date. As always, any decision to sell is driven by value. For this reason, we have decided to retain our diamonds businesses, which are high-quality assets."

Walsh added that he believes the business is on track to build a stronger Rio Tinto. "We are making good progress against our clear commitments and remain focused on the pursuit of greater value for our shareholders.”
 

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