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Harare Bureau
RIO Tinto is said to be pursuing an initial public offering of its diamond unit, after failing to find a buyer.
The diamond unit, the world’s third-biggest producer of rough diamonds with mines in Canada, Australia and Murowa Diamond in Zimbabwe, may be worth about  $2,2 billion, according to international news agency Bloomberg, citing an evaluation report by Deutsche Bank AG in March this year.

Rio Tinto operates three diamond mines — the Argyle Diamond Mine in Western Australia (100 percent shareholding), the Diavik Diamond Mine in the Northwest Territories of Canada (59 percent and the 78 percent Murowa.

The three mines produces combined 20 percent the world’s annual output of rough diamonds, making Rio Tinto the world’s third-largest producer of mined diamonds.

Rio Tinto said last year it was reviewing its diamond business and would consider selling it, as it focuses on expanding in more profitable commodities such as iron ore, copper and uranium.

Rio Tinto has hired Morgan Stanley to oversee an IPO in London, according to Bloomberg, citing a source who requested to be named because the matter was private. But the company was still open to offers.

RioZim Limited, which owns 22 percent stake in Murowa told a local weekly recently that the company would only decide on way forward depending on offers from Rio for the 78 percent and what the market offers to buy RioZim’s 22 percent.

“We do have pre-emptive rights for the 78 percent owned by Rio Tinto plc and depending on the price we will either be buyers or sellers,” said Mr Ashton Ndlovu, the managing director of RioZim in April this year. The process is still ongoing and there have been expressions of interests.” But with the indigenization laws, potential buyers will be only buy 49 percent if they are to comply with the empowerment laws, which requires indigenous Zimbabweans to have at least 51 percent shareholding in mining firms

Last year, diamond output at Murowa increased 9 percent to 313 000 carats compared to 285 000 carats a year earlier. Murowa production increased 11 percent in the fourth quarter of 2012 to 98 000 carats in the fourth quarter of 2012 compared to 88 000 carats during the previous comparable period.

Operations at the Murowa began in 2004, after feasibility studies and mine planning was conducted between 1998 and 2000.
According to initial feasibility studies, the mine’s resource has the potential to be expanded to between six and seven times the current production level.