Rio may have found buyer for stake in diamond mine

Rio Tinto may have found a buyer for its 60 per cent stake in the Diavik diamond mine in Canada, signalling the first of the company’s ‘non-core’ assets to go in a bid to cut costs.

Dominion Diamond Corp, it’s partner in the mine, said it had the financial ‘headroom’ to buy the stake, The Australian reported.

"I think we have certainly got the headroom to undertake a transaction with Rio on Diavik should that be available at the right price," chairman and chief executive Robert Gannicott said.

Last year, the Toronto based diamond company bought BHP’s Ekati diamond mine for $US500 million ($A479 million).

"I'm not going to spend too much time thinking about synergies for something that I can't realise," Gannicott said.

"(I'd) think a lot more about synergies if it was clear that we can become the owner of Diavik. But I mean, that's not clear at the present time," he said.

The move by Rio to break away from the diamond game has been on the company’s agenda since early last year after the company announced it had begun a "strategic review" of its business that would include looking for potential buyers for its diamond assets.

Rio Tinto has also put several of its coal assets up for sale including its stakes in Clermont, Blair Athol, and Coal & Allied.

The mining giant has hired Deutsche Bank to handle the sales, as the company moves to cut costs and boost shareholder returns.

Sam Walsh, who took over as Rio’s chief in January, is said to be moving quickly in a bid to improve returns for investors. The company flagged they will improve shareholder value by selling weak assets.

Walsh set a cost cutting target of $5 billion to be reached by the end of 2014; he also aims to reduce capital expenditure on both approved and sustaining projects to approximately $13 billion in 2013.

Also making Walsh’s hit list is decreasing exploration activities and minimising evaluation spending to the tune of $750 million (pre-tax) in 2013 compared with 2012.

Prompting the cost-cutting measures was the company’s first ever full year loss of almost $3 billion.

Rio is looking to sell its interest’s in the Clermont and Blair Athol thermal coal mines in Queensland for around $1bn.

While in NSW, it may cut 80 per cent of its stake in Coal & Allied, to 51 per cent.

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