Elisabeth Behrmann Sydney
Rio Tinto is pursuing an initial public offering (IPO) of its gem unit, the largest supplier of coloured diamonds, after failing to find a buyer, according to a person familiar with the matter.
Rio Tinto had hired Morgan Stanley to oversee an IPO in London, the person said, asking not to be identified because the process was private. The company was still open to offers for the operations, the person said.
Rio Tinto has been considering divesting the assets since March last year, saying they no longer fit with its strategy.
The unit, the third-biggest producer of rough diamonds with mines in Canada, Australia and Zimbabwe, might be worth about $2.2 billion (R22.1bn), Deutsche Bank said in March.
Rio Tinto also announced the potential sale of its Pacific Aluminum unit and was seeking to sell its Canadian iron ore operations, a person close to the matter said in March.
“Rio has been trying to get out of diamonds for a very long time,” Evan Lucas, a markets strategist at IG in Melbourne, said. “Looking to do an IPO suggests that they haven’t been able to find a private buyer.”
Rio Tinto fell 2.5 percent to close at A$53.80 (R516.51) in Sydney yesterday. BHP Billiton lost 2.3 percent.
David Luff, a Melbourne-based spokesman for Rio Tinto, did not immediately return a message seeking comment on the potential share sale.
Nick Footitt, a spokesman for Morgan Stanley in Hong Kong, did not immediately return calls seeking comment.
The decision on a whole or partial sale of the diamond operations or a separate listing would depend on which offered the most value to its shareholders, Alan Davies, Rio Tinto’s chief executive of diamonds and minerals, said in April.
“It’s a good business in itself,” Lucas said. “It’s probably too small to be a real player within their portfolio makeup.”
Rio Tinto is pursuing asset sales and cutting staff as waning global demand for commodities is crimping revenue across the sector. The plans for a possible London listing for the gem unit were reported on Sunday by Sky News.
BHP Billiton and Rio Tinto are leading global asset sales by mining disposal and may sell businesses or stakes in mines for as much as $35bn, Deutsche Bank said in March.
Glencore Xstrata and Blackstone Group were considering bids for Rio Tinto’s 59 percent in Canada’s Iron Ore, the Wall Street Journal reported on Sunday, citing people familiar with the matter. – Bloomberg