Rio Tinto readies to close world’s biggest diamond mine
Rio Tinto’s (ASX, LON, NYSE: RIO) iconic Argyle mine in remote Western Australia, the world’s biggest and the main global source of high-quality pink diamonds, will close in the fourth quarter this year, potentially pushing prices up and spurring exploration.
The planned closure, the company said, will impact its total diamond output for the year. Rio now expects to produce between 12 and 14 million carats of rough diamonds in 2020, down from the 17 million carats it churned out last year.
The impact on Rio’s balance sheet, however, will be minimal. Diamonds bring in only about 2% of its earnings, while iron ore — the company’s main commodity — accounts for almost 60%.
Pink diamonds, already rare, are about to get scarcer as Argyle is responsible for 90% of worldwide production of the coloured precious rocks. The mine has yielded more than 865 million carats of rough diamonds since it opened in 1983 and, so far, there haven’t been major discoveries or projects capable of measuring up to Argyle in terms of production.
At its peak, the mine produced 40% of world diamond output by volume. It still accounts for all of Australia’s diamond production.
Rio Tinto estimates Argyle’s direct contribution to the East Kimberley is roughly 6% of the region’s gross regional product.
Analysts and auctioneers alike expect prices for the unique diamonds to go up. Pink stones have already been fetching record prices in the past few years and the closure of their main source could see that trend strengthen.
In 2018, the 18.96-carat Pink Legacy sold for $50 million at Christie’s auction house, breaking the world record for price paid per carat for a pink diamond at auction.
At Sotheby’s Hong Kong October sale, one of the star pieces — described as an “exquisite 10.64-carat vivid purplish pink diamond” — sold for just under $20 million.
Rio Tinto’s own data show that the prices for their Argyle pink diamonds have jumped by 500% since 2000.
The mining giant said the decommissioning and dismantling of the mine would take five years, after which it would monitor the site for a period yet to be defined.