Ashton Canada put on block

Rio Tinto (RTP-N) is selling its 65.9% stake in Ashton Mining of Canada (ACA-T).

The London-based major acquired the controlling block in the Canadian diamond explorer through the US$418-million takeover of its parent company, Australia’s Ashton Mining. Rio’s successful bid for Ashton, its joint-venture partner in the Argyle diamond mine in Western Australia, followed a competing takeover bid by De Beers Consolidated Mines (DBRSY-Q) last summer.

The acquisition of Ashton allowed Rio to consolidate its ownership of the Argyle mine, increasing its interest to 99.8%, and ensure independent, single-stream marketing of all of Argyle’s diamonds. Rio recently tabled a A$2-per-unit cash offer for the remaining 0.2% of the Argyle mine held publicly through the Western Australia Diamond Trust.

The mine produced 26.5 million carats in 2000 — a drop of 11% from the previous year, owing to lower grades. Proven and probable reserves at year-end stood at 62.8 million tonnes grading 3 carats per tonne for the AK1 open-pit and 3.8 million tonnes grading 0.3 carat for alluvial material.

Additional resources totalled 168 million tonnes of AK1 lamproite grading 2.8 carats per tonne and 44 million tonnes of alluvial grading 0.2 carat per tonne.

The mine life of the AK1 open pit is expected to extend to at least 2006. Rio has been studying various underground mining options to extend the mine life further, with encouraging results. Resource modelling indicates an underground resource of 25.6 million tonnes grading 4.1 carats per tonne lying beneath the open pit.

The Rio group already explores for diamonds in Canada through its wholly owned subsidiary, Kennecott Canada Exploration, and so has decided to sell its 65.9% stake in Ashton Canada. RBC Dominion Securities has been hired to assist Rio in the sale.

Ashton holds an extensive portfolio of diamond exploration projects in Alberta, Nunavut, the Northwest Territories, Quebec and Ontario.