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.
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is set to deliver six million tonnes of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”