Rio Tinto and BHP Billiton Merging Operations- The Sequel

10 09 2009

Well it seems that I got scooped by The Australian. Now that the news is out, let’s add to it because I feel that the article that was published in the Australian newspaper forgets a few important things worth mentioning.

In short, it was reported on Tuesday that Rio Tinto and BHP Billiton were considering merging their diamond operations in Canada’s Northwest Territories as both the companies’ mines are adjacent. Should you be ready to unleash your enthusiasm at the prospect of Pilbara joint venture sequel, let me remind you that the benefits arising from this will be limited. The potential for synergies arises from the sharing of infrastructure, staff and the possibility of a marketing joint venture.

The Australian did not mention that Rio Tinto’s Diavik diamond mine in the Northwest Territories is an unincorporated joint venture with Harry Winston Diamond Corp. The latter has a 31% stake in Diavik following the sale of a 9% stake to Kinross Gold Corp in March 2009. Well Harry Winston Diamond Corp has a First Right of Refusal in the event of an acquisition of Diavik assets. I would assume that acquiring Harry Winston Diamond Corp would be a necessary first step to any deal involving BHP Billiton and Rio Tinto in the Northwest Territories.

From what I head heard in the past weeks, BHP Billiton was contemplating a $10 billion investment in Northwest Territories diamonds. Rio Tinto was rumoured to want to sell its diamond operations earlier this year as it sought to sell non-core assets to address its debt-problem. Could BHP Billiton just end up acquiring the Diavik mine as it’s probably a simpler route?




One response

17 03 2010
Web Designing Karachi

It’s great to see fresh, creative ideas that have never been done before.

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