Rio Tinto Weighing Options on India's Diamond Market
After much consideration, Rio Tinto (LSE:RIO) (NYSE:RIO) is expected to enter India’s growing diamond market. The one question that remains, however, is – when?
The Anglo-Australian mining company, which first discovered the "Bunder" diamond deposit in Madhya Pradesh in 2004, has recently completed the prospecting and exploration for the project. Nevertheless, with all necessary steps completed, Rio is not pushing for an accelerated mining lease.
Instead, the company said it will begin developing the project according to its 2017 guidance despite India’s new business-friendly political regime which is working to revitalize stalled projects in the country.
“The process of the approvals is going on, but Rio Tinto’s people don’t seem to be in a great hurry,” senior official in the Madhya Pradesh government said. “They say that is how it is.”
Although it may appear Rio Tinto is working slowly on its application processes for the project, Nik Senapati, managing director of Rio Tinto India, says the company is conducting business like usual.
“All parties are working towards getting the clearances which should take in the order of 12-18 months,” Senapati said.
“…we would not like to rush the process and get stuck later whether it is in approval process or engineering rigor.”
Falling commodity prices have put immense pressure on Rio Tinto to maintain cost cutting and cautious expansion plans in countries, including India.
According to Tony Robson, managing director and co-head global mining reach at BMO Capital Markets, the decision on whether to speed up the diamond mine’s development is up to the Rio Tinto board.
“The mine may commence in 2019 or 2020, if the project is approved by the Rio board and gets necessary government support.”
Robson added, “Rio Tinto will put the money wherever the returns are highest. Coal would not be on that list right now, but generally iron ore, bauxite and copper give the highest returns. For diamonds, the next most likely project to be approved may be the A21 Pipe at Diavik.”
Rio has reduced its capital expenditure for 2014 to around $9 billion, almost $2 billion below the previous guidance.
The Bunder diamond project in India, along with a slew of other mine projects Rio Tinto has on its plate, will be evaluated when the right time comes to do so.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.