Progress has been made for a proposed IPO for Rio Tinto’s diamond division, sources say, with some hoping it will launch before the end of the year.
“There’s the real possibility of an IPO,” one source tells me.
Rio Tinto announced its plan to divest of its diamond assets over a year ago. Its diamond division consists of three mines—Argyle in Australia, Murowa in Zimbabwe, and the majority holding of Diavik in Cananda—and one likely producer, the Bunder project in India.
There are several reasons why Rio Tinto might go the IPO route. Selling the mines piecemeal is more timely and cumbersome than selling each property separately. Of course, Rio could still do that; anything is a possibility when a division is up for sale. But one assumes that if Rio really wanted to quickly get out of the business, it would have done so already, like BHP has.
Which means there are two options: Selling the entire division to an outside buyer, or floating an IPO. With no likely outside buyer appearing, an initial public offering looks more likely. If the Rio Tinto diamond division is floated, the miner may remain a shareholder of the new company, at least at first.
This would mean that the diamond business would be dominated mostly be “pure-players”—companies solely devoted to diamonds, including Alrosa, Dominion, and De Beers. This is how gold mining works, and it could be a positive development, since this industry would be dominated by entities dedicated to this business—instead of, like Rio and BHP, just dabbling in it.