A BHP-Rio Merger?

Well, those rumors of a possible merger between Rio Tinto (which owns the Argyle and Murowa mines and partially owns Diavik) and BHP (which owns most of Ekati) turn out to be true. Rio has rebuffed BHP’s first takeover attempt, but BHP is not backing down. And analysts think, if BHP really wants to make this happen, it will.

As this notes, the combined company, if there is one, will be a significant player in the diamond industry (the third largest producer), although diamonds will not be a particularly big part of the prospective company’s business.  

For the diamond market, this could be a mixed blessing. A combined company may have less “sightholders” than the two do as separate entities, which would mean further industry consolidation. On the other hand, with more money at stake, it’s possible BHP-Rio will take a more active role in this industry, and get more involved in promotion.

The other question is how this will impact Anglo-American, the 45% owner of De Beers. Anglo has been the subject of takeover rumors itself. Its stock has risen because of this, as some feel it makes the company a likelier target for takeover. (It may also try to take over other companies.) In the event of a merger or a takeover, what happens to its De Beers holding is anyone’s guess.

Big forces are in play, and while the diamond market may not have a say in what is happening in these boardrooms, these events could impact us all.

UPDATE:  Now there is speculation Anglo could go for Rio. My oh my …

JCK News Director