No Buyer for Rio Tinto Diamond Mines

Besides the Argyle mine, Rio Tinto also owns a controlling stake in the Diavik mine in Canada. Rio Tinto’s partner is Dominion Diamond Corp. (NYSE: DDC), formerly the Harry Winston Diamond Corp., until Winston sold its luxury retail operations and name to Swatch for $1 billion in January.

Rio Tinto was able to raise diamond production last year, from 11.7 million carats in 2011 to 13.1 million carats, but production still trails far behind both De Beers and Russia’s Alrosa.

Demand for diamonds and other luxury goods has risen in Asia, particularly in China, in the past few years. That may be about to end, given the Chinese government’s new cultural program, called “mass line education,” which attacks the “four evils: formalism, bureaucracy, hedonism and extravagance.” Diamonds fall into at least one, and probably two, of these evil categories.

Rio Tinto’s new CEO said the company will keep its diamond assets because this is the best way to create shareholder value. Well, it is certainly better than nothing, which is about what potential buyers thought the assets were worth.

Rio’s shares are trading down about 2% in London today, and are down nearly 3% in premarket trading this morning in New York, at $40.32, a new 52-week low if it holds. The currrent 52-week range is $41.16 to $60.45.