The diamond group of
Situated in Western Australia, the Argyle operation contributed net earnings of US$53 million for the first six months, versus US$24 million in the corresponding period of 2002. Production totalled 13.7 million carats for the half-year, off 6% from a year earlier, owing to lower grades and fewer processed tonnes.
In Canada, production at the newly constructed Diavik mine in the Northwest Territories improved to 62% of design capacity during the second quarter. “The ramp-up is going well and grades are improving as mining moves into the main kimberlite orebody,” says Rio Tinto Chairman Robert Wilson.
Rio Tinto’s first sale of Diavik diamonds occurred in early July. “The price achieved was significantly higher than our original expectations,” says CEO Leigh Clifford. “We are pleased with the level of interest generated by the first sales.” (Figures were not disclosed.)
Rio Tinto operates, and has a 60% interest in, the Diavik mine. The remaining interest is held by
“Diavik is an asset of the highest quality, and it’s going to start to contribute to earnings in the second half of the year,” says Clifford. “We are building up our inventory such that when we embark upon the sales, we’ll have a reasonable spread of diamonds for individual customers.”
Diavik’s 20-year mine plan is based on four kimberlite pipes (A-154 South, A-154 North, A-418 and A-21), which contain proven and probable reserves of 27.1 million tonnes grading 3.9 carats per tonne, equivalent to 107 million carats at an average value of US$62 per carat.
The first 10 years of production will come predominantly from the A-154 pit, incorporating both the A-154 South and A-154 North pipes, which are only 100 metres apart. A-154 South is the largest pipe of the bunch, with the highest grade and the most value. Alone, it will deliver a total of 55.2 million carats from a minable 11.6 million tonnes of kimberlite grading 4.76 carats per tonne, including an underground portion containing 1.4 million tonnes at 4.2 carats per tonne, equivalent to 6.1 million carats.
The mine plan incorporates only 4.5 million carats of A-154 North from 1.3 million tonnes of probable ore grading 3.5 carats per tonne at an estimated value of US$33 per carat. This was based on a parcel of only 157 carats of diamonds recovered during the prefeasibility drilling campaign.
A 19,342-tonne bulk sample was recently mined from the low-grade upper geological section of the A-154 North pipe. In total, 11,771 carats of diamonds were recovered. The parcel was valued by WWW International Diamond Consultants at a price of US$82 per carat.
“The quality of the diamonds in this pipe is now considered to be much more similar to those in A-154 South than originally thought,” says Clifford.
Rio Tinto is recalculating the reserve estimate for A-154 South; once this is complete, the mine plan will be revised to take into account the bulk-sample results of A-154 North. The A-154 North pipe contains an overall resource of 11.5 million tonnes grading 2.4 carats per tonne, for a total of 27.5 million carats.
Group earnings for Rio Tinto during the first six months of 2003 were off 9% from the comparable period of 2002 at US$641 million. The decline is blamed on a sharp appreciation of most currencies against the U.S. dollar, without a corresponding increase in commodity prices. Volumes, especially in iron ore and diamonds, have been higher, but cost pressures as a result of higher energy costs and pension costs offset them. Operations generated a cash flow of US$1.6 billion, close to what was achieved a year earlier.
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