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Rio Tinto could go for Arkhangelsk diamonds

Photo: severalmaz.ru

One of the largest mining companies British-Australian company, Rio Tinto, is discussing the possibility of buying a large share of the company Severalmaz engaged in development of diamond deposits of Lomonosov.

Rio Tinto plans to acquire 50% minus one share of the enterprise. The transaction value could reach $250 million. In addition, the company will invest in the development of the company 135 million dollars, which will bring it to full capacity by 2015 (2 million carats per year), reports Vedomosti.

Severalmaz is a subsidiary of Russia’s largest diamond mining company Alrosa, which accounts for 25% of world diamond production.

Severalmaz company was established in 1992 to develop Europe’s largest diamond mine named after Lomonosov which reserves are estimated in 220 million carats of rough diamonds. Since the year of its establishing Severalmaz is loss-making enterprise.

Read moreDe Beers might withdraw from Arkhangelsk diamond deal

The cost of diamonds mined at the deposit is too high for the current situation on the world market. In 2009, the company resulted with over 1 billion rubles of losses. Coming of a strategic investor can attract the capital necessary to build the second phase of mining and processing enterprise, but also gives the company a possibility to use new technologies of Rio Tinto. 

The final decision on this transaction is expected to be made by the Board of Alrosa on December 28.

Read alsoMore diamonds for Arkhangelsk

The Lomonosov’s Diamonds deposit is situated in 100 kilometers to the North from Arkhangelsk. It is represented by 6 kimberlitic pipes. About 60% of rough diamond is gem quality.

Diamond reserves are estimated at $12 billion.