Rio Tinto (ASX:RIO), the world’s second-largest miner, just became the sole owner of the Diavik diamond mine in Canada’s Northwest Territories on Thursday. Despite saying in the past the Company was not interested in taking full control of the aging arctic mine, Rio Tinto ended up buying the 40% share held by Dominion Diamond Mines for a total stake of 100%.
Part of the transaction includes Rio Tinto releasing Dominion and its lenders from any outstanding liabilities or obligations involving funding the operation or the closure of the joint venture. On the other end, Rio Tinto will receive all remaining Diavik assets held by Dominion including a security cash collateral for the potential future closure for the mine and unsold production.
Why the Buyout Now?
Dominion, which used to be the fourth-largest diamond producer, suffered some financial troubles which played out in court over several months last year. These troubles ultimately led Dominion to sell its other Canadian mine, Ekati in December 2020. In 2017, The Washington Companies ended up buying the Company for $1.2 billion.
This deal follows a 19 month long process beginning in April 2020 by Dominion Diamond Mines filing for insolvency protection under the Canadian Companies’ Creditors Arrangement Act.
Diavik has been in production since 2003 and is eventually facing closures in 2025 which will cost hundreds of millions of dollars to fully clean up. Diavik is Canada’s largest diamond mine, and yielded 6.2 million carats of rough diamonds in 2020.
Rio Tinto Minerals boss Sinead Kaufman said in a statement, “Diavik will now move forward with certainty to continue supplying customers with high quality, responsibly sourced Canadian diamonds.”
Worries and concerns began to surround the diamond market due to production coming to a
halt during the global COVID-19 pandemic, with some people worried the market would never recover. However, Alrosa, the world’s top diamond miner by output, claims the market has fully recovered from the effects of the global pandemic, and sales of jewelry and rough diamonds are up 23% this year compared to 2020.
Rio Tinto Invests US$87 Million to Boost Low-Carbon AP60 Aluminum Production
In other recent news, Rio Tinto (ASX:RIO) decided to invest US$87 million in order to increase capacity at its Canadian low-carbon aluminum production project. The company is creating 16 new smelting cells in the Saguenay-Lac-Saint-Jean region of Quebec at its AP60 smelter in the which will increase the production by about 45%, or 26,500 metric tonnes of primary aluminum per year.
This will increase capacity up to 86,500 metric tonnes. Not only will production increase, but this upgrade will secure the futures of up to approximately 100 employees who work at the smelter by extending the life of the project.
Rio Tinto Aluminium chief executive Ivan Vella commented: “Rio Tinto is committed to strengthening its position as a leader in low-carbon, hydro-powered aluminum production to meet the clear demand from our customers in North America and Europe. Our AP60 technology is one of the most energy-efficient, environmentally friendly and cost-effective systems in commercial production today. It produces some of the world’s lowest carbon aluminum with renewable hydropower here in Quebec. We are assessing options for further investments, as we progress development of the ELYSIS zero-carbon smelting technology with our partners.”
Rio Tinto predicts the aluminum market will grow at an average rate of about 3.3% per annum over the next decade as strong demand for the metal comes from green energy transition and decarbonization.
The AP60 technology building generates seven times fewer greenhouse gases than the average building in the industry and was created by Rio Tinto’s research and development teams. Since 2013, the initial AP60 technology pots have produced more than 465,000 tonnes of low-carbon aluminum.
The new work will begin in 2022 and should be completed by the end of 2023. The new pots will be built in the existing building of the Complexe Jonquière’s AP60 technology centre, which currently has 38 pots. As the new pots are being built, Rio Tinto will also be looking into potentially installing AP60 cells at the site in the future.