Rio, BHP considering options to exit the diamond industry
London-based Rio Tinto and Melbourne-based BHP Billiton are considering options to exit the diamond industry as they see little prospects of growth in the field.
Rio and BHP, together grabbed around 16 per cent of worldwide diamond production by value in 2010, but the duo could not match the output of industry leaders, viz. De Beers and OAO Alrosa.
But, the two miners are enjoying a dominant position in the field of iron ore, where the duo along with Brazil’s Vale SA, owns a market share of around 63 per cent.
De Beers, which operates the Botswana-based world’s largest diamond mine, produced 31.3 million carats last year, while Rio could produce only 11.4 million carats.
Ed Sterck, an analyst at BMO Capital Markets, said that Rio and BHP can not get the scale they want in the field of diamonds.
Speaking on the topic, Sterck said, “Diamonds don’t really fit with the modus operandi of the big diversified majors and it’s always been a bit of an anomaly that they’ve stuck with it.”
The two companies are considering options to exit the diamond industry as prices of rough diamonds climbed 24 per cent in 2011, after two rising more than 32 per cent for two years in a row.
Moreover, the use of diamonds has been estimated to grow at double the pace of supply through the year of 2020 as diamonds, thanks to expanding higher middle class in the Asian countries like China and India.