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Harry Winston Diamond Corp is in advanced talks to buy Anglo-Australian mining giant Rio Tinto's 60-per cent stake in the Diavik Mine in Canada, the Financial Times yesterday reported, citing two industry sources. The Diavik Mine - Canada's largest diamond mine with the highest grade diamond ore bodies, is 60 per cent owned by Rio Tinto and the remaining 40 per cent by Toronto, Ontario-based Harry Winston. In March, Rio Tinto, the world's third-largest diamond miner, followed rival BHP Billiton in announcing that it would exit the diamond business by inviting bids for its portfolio of diamond mines. (See: Rio Tinto to exit diamond business) Rio Tinto, the third-largest diamond producer behind De Beers of South Africa and Russian state-owned Alrosa, operates three diamond mines that include its fully-owned Argyle mine in Australia, Diavik mine in which it holds a 60-per cent stake, the Murowa mine in Zimbabwe where it has a 78-per cent stake, apart from its fully-owned Bunder diamonds project in India, which in advanced stages of development. The value of Rio Tinto's diamonds business on its books is $1.2 billion, but analysts say that the business may fetch around $2 billion. Rio Tinto's stake in Diavik could fetch at least C$600 million, the sources told the papers and added that Harry Winston intends to issue debt to fund the deal. Rio Tinto, which produces around 15 per cent of the world's diamonds by volume, has seen its earnings from diamonds drop by 86 per cent to $10 million last year on revenue of $727 million, mainly due to lower production and higher costs at its open-pit Argyle mine, which is undergoing a $2.1 billion underground expansion.
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