Rio Tinto Looks at Russian Diamond Partnership

By Joel ScanlonMar 23 2011

The Rio Tinto Group is trying to set up a joint venture with Russian state owned diamond mining company Alrosa. The Australian listed mining giant seems keen on developing the large deposit near the north port of Archangel under the partnership. The deposit is estimated to have 128 million carats and is an attractive opportunity.

The fact that Rio Tinto is very interested in the project seems to be given weight by the frequent trips that chief executive officer Tom Albanese has taken to Russia in the last year, especially considering that Rio Tinto has no operations in Russia. . Although it is not officially confirmed by Rio Tinto officials who just declined to comment on the matter.

As per a report published in the United Kingdom they seem to be in negotiations with the largest Russian diamond mine operating firm. Alrosa was responsible for 25% of the world’s rough diamond supply last year. The increasing demand from China for diamonds seems to have been the main motivation behind Rio Tinto’s move.

Alrosa has expressed interest in a joint venture for the project as it needs to spend its own money on its other mines. Industry specialists however are not too sure why Rio Tinto would want to get into this operation as there have been no new discoveries in years. Plus the exploration return on capital in the diamond industry is not attractive at all.