Rio Tinto sells stake in Canadian diamond project, ups interest in copper

Rio Tinto is reshuffling its interests in two Canadian projects as the global miner seeks to focus on assets considered key for the world’s transition to a green economy, such as copper and lithium.

The company has decided to sell its 75% interest in the Fort à la Corne diamond project in central Saskatchewan to joint venture partner Star Diamond Corp. in exchange for shares in the junior.

As a result, Rio Tinto Exploration Canada will own a 19.9% stake in the exploration and development company.

Rio Tinto’s head of exploration Dave Andrews said the company was now “firmly focused” on identifying opportunities in metals and minerals that support the energy transition.

“We are grateful to Rio Tinto for the significant monetary investment and expertise it has contributed to the project over the past more than five years, which has meaningfully advanced what Star Diamond believes is one of the most promising diamond projects in the world,” president and CEO Ewan Mason said in a statement.

Rio Tinto’s move follows years of tension between the partners over the terms of their development agreement. The situation saw both companies face off in court and, at one point Star Diamond considered cutting RTEC out of the project.

The partners reached an agreement on the subject in December 2021, after which RTEC put the project on hold until it could determine whether it wanted to continue or exit the venture. The camp was demobilized, and the project put on care and maintenance in the first quarter of 2023.

Copper and lithium
Rio Tinto has also moved to increase its stake in Canada’s Western Copper and Gold Corporation (TSX: WRN), which is advancing the Casino project in the Yukon Territory.

Under the deal, RTEC is acquiring 3,468,208 common shares at a price of C$1.73 per share, or about C$6 million ($4.4m) total. This increases Rio Tinto’s ownership to 9.7% of Western’s outstanding common shares.

Vancouver-based Western Copper and Gold, which remains the sole owner of the Casino project, said it would use the proceeds of this fresh investment to fund specific areas of study with the aim of progressing through permitting to a development phase of the proposed mine.

“We are pleased that Rio Tinto has elected to continue to invest and work with Western to advance the Casino project, with a focus on furthering infrastructure development and streamlining the regulatory process,” CEO Paul West-Sells said in the statement.

Rio Tinto chief executive officer Jakob Stausholm recently said in an interview that the company continued to look for ways to increase exposure to key minerals and metals, particularly copper and lithium.


Rio Tinto Buys Remaining Share of Diavik Diamond Mine

Rio Tinto office in Montreal, QC, Canada

Rio Tinto, 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.

Source: miningfeeds

Why Canada’s diamond miners are in trouble

Canadian diamond mining

It’s only been 20 years since diamond mining began in Canada, but the industry is already on its knees.

The story of how two prospectors, down to their last nickels, discovered diamonds in Canada’s frozen north is the stuff of legend.

Back in 1982, Chuck Fipke and Stewart Blusson laid low in a pup tent by day while their competitor De Beers hauled 45-gallon drums of rock samples to a nearby outpost for transport to South Africa. Using the long hours of summer sunlight north of the 65th parallel, the two searched for indicator minerals — bits of garnet, chromite or zircon often found with diamonds — while their opponent slept. Nine years later their treasure hunt culminated with the discovery of a carrot-shaped funnel of blue-grey kimberlite rock that would become Ekati — the first great diamond mine outside Southern Africa or Russia.

For all the drama associated with the discovery in Canada’s Northwest Territories — hacking through snow and ice taller than the average person, battling Arctic winds and temperatures of -50 degrees Celsius — what came next is proof that diamond mining in Canada is not for the faint of heart.

Whether a diamond mine makes money or not comes down to three variables: production costs, the grade and size of the deposit, and the price the diamonds fetch on global markets. In recent years, all of these have conspired to bring the Canadian industry to its knees.

“It’s disconcerting, given the way it started,” said Blusson, an active octogenarian who helms diamond exploration company Archon Minerals Ltd. and still flies his own helicopter. “Twenty years is only all we’ve been mining now. Is there going to be another 20 years? I don’t know.”

Ekati and sister mine Diavik, located 210 kilometres (130 miles) south of the Arctic Circle, are now old, tired and running out of diamonds; they will likely both close soon. So far, the mines that were designed to replace them aren’t faring well either.
Diamonds from the Diavik mine in 2003. Ian Lindsay/Vancouver Sun files

De Beers, the London-based diamond giant, has already flooded one of its huge Canadian mines; the other, Gahcho Kue, took 21 years to reach production and is now turning out stones worth far less than it hoped. It’s a similar story for a scattering of newer mines that have sprung up across the country: low quality stones, management mistakes and falling prices for their stones put a terrible squeeze on their businesses.

Every operating mine in Canada produces stones that fall below the global average, with all but one mine producing diamonds that fetch less than US$100 a carat. By contrast, both De Beers and Alrosa, which mine more than half the world’s diamonds, average more than US$160 a carat. For smaller miners in Southern Africa, the gap is even more extreme. Gem Diamonds Ltd. and Lucara Diamond Corp. had average selling prices of US$2,131 and US$502 per carat respectively last year.

While Canada is now the world’s third-biggest diamond producer, behind Russia and Botwsana, its average selling price is the cheapest of the major diamond mining countries.

The question for Canadian producers is whether it makes sense to change strategy and focus on bigger, more valuable stones.

“Can you save considerable amounts of money by upping your cut-off size and just recovering those goods?” asks Eira Thomas, who co-founded Stornoway Diamond Corp., and served as its president and chairwoman for years. Now chief executive officer of Vancouver-based Lucara Diamond, which produces high-end diamonds in Botswana, Thomas is more optimistic about Canadian production than Blusson.

“They’re not in jeopardy of failing, they’re just not making as much money as we had hoped,” Thomas said. “And that, of course, is translating to discontented shareholders more than anything else.”

Shares Plunge

That may be an understatement. Shares of Longueuil, Quebec-based Stornoway trade near a record low of just 10 US cents a piece, even after opening the US$750 million Renard mine in 2017, the province’s first. It’s a similar story for Toronto-based Mountain Province Diamonds Inc., which owns Gahcho Kue with De Beers. Its shares are close to the lowest since the financial crisis, cutting its market value to below $250 million (US$187 million).

Canada’s flagship miner, Dominion Diamond Mines, the owner of Ekati and a stake in Diavik with Rio Tinto Group, has also had a rough ride. After being bought for US$1.2 billion more than a year ago, the company has been hit by an exodus of top management, with at least five executives leaving, including its CEO and CFO.

The new owner, billionaire Dennis Washington, has also sought to sell the company, according to people familiar with the situation. Washington denied this is the case. Dominion is currently studying two potential expansions, though both projects produce even lower-quality stones, making them a tough sell in the current environment.
Maturing Sector

“You have a maturing sector in Canada: Ekati and Diavik were good mines. When you have good mines, others follow even if the economics are a bit more of a close call,” said Anish Aggarwal, a partner at consultant Gemdax, based in the diamond trading city of Antwerp. “That’s becoming a problem in many mining jurisdictions, not just Canada.”

There are other problems facing the sector. Indian Prime Minister Narendra Modi’s fight in 2016 against so-called black money caused producers such as De Beers to hold back supply, which has now been sold back into the market. A weaker rupee is also making diamonds more expensive for Indian manufacturers, who cut or polish about 90 per cent of the world’s stones.

There is also increasing pressure from synthetic diamonds. While still a very small part of the industry, the potential threat they pose risks further hurting sentiment in an already fragile market.
A synthetic diamond ring.

Still, there are reasons why Canadian diamond mines keep getting built — and in some cases it has little to do with economics. For De Beers, which has developed three mines there, Canada reduces its dependence on Botswana, where most of its diamonds are mined.

Aggarwal, who was involved in developing what became known as the “CanadaMark” brand to capitalize on the country’s clean image, says there’s potential for more to be done with that.
Canada Brand

“Consumers in the U.S. and Canada have positive associations with Canadian diamonds,” he said. “There’s an opportunity with origin. It’s a tool that the miners can use to enhance the value of their diamonds.”

But the track record there hasn’t been good either. Canada tried to create a polishing industry in the Northwest Territories, capitalizing on the backlash against “conflict” diamonds. “Made in Canada” diamonds seemed an easy sell: ethically produced, mined from ice, cut, polished, and laser-etched with a tiny polar bear. Today, the polishing industry is all but gone and attempts by Dominion to revive the CanadaMark have met with mixed success.

There’s no getting around the higher costs of operating in Canada’s frozen tundra. Everything — labour, fuel and construction — costs more in the remote north.

“You look at these diamond mines, you’ve got your own road, your own airstrip, your own power grids,” said Tom Hoefer, executive director of the NWT & Nunavut Chamber of Mines. “That may be okay if you’ve got a world class deposit, but not everybody is mining world class assets.”


Victor Mine To Be Closed By De Beers in 2019

De Beers Victor Mine Canada

Production will cease at the De Beers Victor mine in Canada in 2019, the company announced Wednesday.

The Diamond Mine in Ontario started production in July 2008 will continue to operate until the open pit is exhausted. This is in line with the company’s original study of mine and the plan for the project.

The mine has yielded 7 million carats of rough exceeding the forecast of 6 million carats predicted for its life of mine.


De Beers discovered the Victor kimberlite cluster in 1987 the first economically viable mine in Canada.