In a surprising about-face, Rio Tinto has decided not to sell its diamond assets.

The mega-miner cited favorable conditions in the diamond market for its decision to keep the properties.

Rio Tinto currently operates three diamond mines: Argyle in Australia (100 percent interest), Diavik in Canada (60 percent interest), and Murowa in Zimbabwe (78 percent interest). It also has the Bunder “advanced diamond project” in India.

Rio Tinto first announced it was looking to sell its diamond assets in March 2012, in a move that came on the heels of a similar announcement from another big miner, BHP.

However, while BHP sold its diamond assets in a little over a year, Rio Tinto seemed to be taking its time, looking at a variety of options, including spinning the mines off in an initial public offering.

Complicating matters was the fact that Dominion Diamond had the right of first refusal to buy the remaining 60 percent of Diavik, one of the assets in the Rio Tinto Group. In an interview with JCK, Dominion Diamond CEO Bob Gannicott said that his company’s right applied even if the mines were sold as a group. He also said his company was not interested in Argyle.

Rio’s decision has been somewhat telegraphed by a June 15 interview with the mining giant’s new CEO Sam Walsh.

Regarding the diamond division, Walsh told The Daily Telegraph : “This is not market day at the bazaar. I’d be quite happy to keep it.”

“The medium to long-term market fundamentals for diamonds remain robust, fueled by growing demand for luxury goods in Asia and continuing strong demand in North America,” said Rio Tinto Diamonds & Minerals chief executive Alan Davies in a statement. “We have valuable, high-quality diamonds businesses that are well positioned to capitalize on the positive market outlook. After considering a number of alternative strategic ownership options, it is clear the best path to generate maximum value for our shareholders is to retain these businesses.”

Rob Bates

JCK News Director