Australian-British mining concern Rio Tinto is eyeing the Russian market, according to http://rus.ruvr.ru. The world's second-largest mining company would like to mine diamonds on the diamond field belonging to Russian concern ALROSA.
Analysts believe that this kind of cooperation will be beneficial to both parties. The Australians will have an access to a promising market, while the Russians will get modern technology and investments.
Rio Tinto has long been keeping an eye on the Russian market. The Australian-British holding’s interests embrace almost the entire mining sector. They include production of aluminum, copper, coal, uranium, gold and diamonds. Last year, there were reports that Rio Tinto was prepared to buy a stake in Russia’s Uralkali, but the deal never materialized.
About the same time it was reported that Rio Tinto had intentions to invest in diamond business in Russia. The only way to enter this market is to strike a partnership with local monopoly ALROSA. UBS bank analyst Alexei Morozov said that this kind of interest displayed by foreigners to Russia is associated with a rapid growth of the diamond market. Especially in China. Besides, Rio’s business is currently picking up steam.
"This upsurge of interest may now be attributed to the fact that the mining market has almost fully recovered. Companies are looking for opportunities to enter new markets and to expand their production capacities and diversification. So far, Rio is not present on such an important market like Russia. I think that cooperation with ALROSA is one of the options to enter the Russian market, because the previous attempts to enter it failed to score much success," says Alexei Morozov.
Rio Tinto’s annual diamond output is currently about 14 million carats. For comparison, ALROSA is turning out more than 34 million. The Russian company is briskly modernizing production and developing a new diamond field, the one named after Lomonosov. The latter is just the thing eyed by Rio Tinto. It is located in the Arkhangelsk Region of Russia and features reserves estimated at USD 8 to 12 billion. According to experts, the access to the Lomonosov deposit may cost Rio Tinto about $400 million. In turn, ALROSA would like to get access to state-of-the-art technologies of mining and processing diamonds, Alexei Morozov believes.
"As far as we know the market, the Lomonosov Diamond Field is not the easiest one for developing,” he said. “So the main thing for ALROSA is to diversify risks. This is the first thing that counts. And the second is to introduce new mining and dressing technologies that Rio Tinto can bring to this project."
Industry analysts do not rule out that in the long term the partnership of Rio Tinto and ALROSA may become even closer. The Russian mining group intends to hold an IPO in 2012 and the Australian-British company could buy some of its shares.
