Rio looks to Africa to expand diamond business

Photo: REUTERS

Rio Tinto wants to grow its diamond business and is looking hard at Africa for new investments.

ALLAN SECCOMBE

Published: 2011/03/30 07:26:00 AM

RIO Tinto wants to grow its diamond business and is looking hard at Africa for new investments after its multibillion-dollar offer for coal explorer Riversdale was made unconditional yesterday , giving it a stake in a large Mozambique coal project.




Rio chairman Jan du Plessis said the A3,9bn bid for Sydney- listed Riversdale was the first major investment by the group in three years and it was a clear sign that the company was looking for growth. Rio has 41% of Riversdale and is pushing hard to garner a majority stake.




"Rio is very much in a growth phase," said Mr du Plessis. "After the very difficult times we were in two years ago when we had 40bn of debt and all sorts of problems to deal with, all that is behind us and we now have a strong balance sheet and many of our shareholders tell us it is too strong."




This year, Rio expects to spend 13bn on capital expenditure programmes for projects already within the company.




"We are also looking at acquisitions and the Riversdale announcement today is a case in point," Mr du Plessis said.


He said Rio was not looking for large, company-transforming purchases. "We are not trying to do anything grand, but there are a number of businesses sufficiently attractive to us . They will cost in single-figure billions ."




He said large resources companies were encountering headwinds from governments when it came to clearing competition hurdles because of the size of the companies. In a case such as Riversdale, however, Rio would not just spend billions of dollars buying the company, but it would need to spend billions more to bring coal mines into production and on infrastructure to export the coking and thermal coal.




Mr du Plessis declined to comment in depth on Zimbabwe, where Rio has the Murowa diamond mine.


The Zimbabwean government last week gazetted requirements for foreign-owned companies to dispose of 51% of their assets in the country to "indigenous investors", stampeding investors in Impala Platinum and Aquarius Platinum, which are both heavily exposed to the country.




"We need to learn more about what’s going on and what’s being suggested," Mr du Plessis said.








seccombea@bdfm.co.za