Rio Tinto iron ore market downturn to sell more diamonds in China

Updated: October 20, 2015  Views: 10

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To protect cash flow and improve performance, Rio Tinto will produce positive gravity tilt operation to copper and aluminum business. At the same time, Rio Tinto also continue to strengthen (01929.HK) in cooperation with the diamond jewelery retailer Chow Tai Fook [microblogging], hope China will sell more diamond market.

Newspaper reporters in Beijing Jin Ying Shu

Mining winter, iron ore prices stumble endlessly affected, the world's second largest iron ore giant Rio Tinto: Performance (NYSE RIO) has also been no small impact in the first half net profit of only $ 806 million, up fell more than eighty percent.

To protect cash flow and improve performance, Rio Tinto will produce positive gravity tilt operation to copper and aluminum business. At the same time, Rio Tinto also continue to strengthen (01929.HK) in cooperation with the diamond jewelery retailer Chow Tai Fook, want more diamonds sold to the Chinese market.

Three-quarter production increased in spite of

October 16, Rio Tinto released three quarterly show, its low-cost expansion strategy continues. As of the end of September, Rio Tinto's third quarter total production of 86.1 million tons of iron ore, an increase of 12% over last year, even though Compared with the second quarter of this year also greatly increased 8%, in the first nine months, Rio Tinto's global iron ore production reached 240 million tons, an increase of 11%.

The main consumer of commodities due to China's economic slowdown, demand for iron ore began to malaise, while Rio Tinto, BHP Billiton, Vale and other mining giants have chosen to buck the trend increase in the hope that competition for share of the low-cost strategy, Forced out of the market cost miners bankruptcy in which Rio Tinto had made at the beginning, it seeks to raise annual output to 350 million tons in 2017, which can in 2020 the cost of iron ore exports to China fell 35 per tonne dollars.

Excess supply resulting in iron ore prices plummeted, the international benchmark price of iron ore compared with the peak period in 2011 (about $ 150) has fallen more than 70 percent, for months has been low volatility at around $ 50.

Cheap war although not beat some high-cost miners, but giants own profits also declined, with Rio Tinto in August 2015 released report shows that in the first half of this year, Rio Tinto net profit $ 806 million, compared with $ 4.402 billion over the same period in 2014, dropped by 82%, while the performance is mainly due to a large drop in iron ore sales to drop 40% year on year.

Agency predicts that iron ore supply in the next two to three years will remain surplus state. Morgan Stanley believes that by 2020, global oversupply of iron ore from the current 58.1 million tons to 83.2 million tons enhance Citi 7 report released last month said it expects the first half of next year the international iron ore prices will fall below $ 40 per ton.

China Metallurgical Industry Planning Institute president-Lee had told the 21st Century Business Herald reporter interview, he said, 'like Rio Tinto, BHP Billiton and other multinational giants, to enhance profits, it will be hard to enhance the technology and reduce operating costs, the lowest they can reduce costs tons of ore to below $ 20 drop in price to $ 40 even mine, or giant's profitability. '

Chow Tai Fook work together to sell more diamonds

Despite the adverse economic expansion of iron ore, but the 'black gold' of the performance of the company contribution rate shrunk. Since this year, Rio Tinto to cut operating expenses to reduce costs, but also the production and management focus to better prospects copper and aluminum tilt. In addition, Rio is still overweight diamond business, hoping to sell more diamonds to enhance the Group's cash flow in China.

Recently, Rio Tinto Diamonds and Industrial Minerals Group CEO Howard Davies (Alan Davies) to the 21st Century Business Herald reporter: 'China's fashion jewelry market (as opposed to the luxury markets) in the past four years, has grown to more than $ 13 million, it grew by about 10 times. '

China is the main objective of Rio Tinto to develop the market of fashion jewelry. In 2008, Rio Tinto and diamond jewelry retailer Chow Tai Fook through cooperation diamonds sold in the Chinese market. 5 years, they have developed a series of Diamond Rio Tinto supply to the CTF Diamond, 70% come from the Argyle mine in Australia.

Data provided by Rio Tinto, the total size of the global diamond retail market of about $ 85 billion, while China accounted for 13 percent of global rough diamond market (about 11.05 billion US dollars) or so, of which Rio Tinto's diamond supply has accounted for China about 7 percent of the diamond market. Rio did not disclose details of its diamond business sales data to the media.

Davies believes that Rio Tinto diamond business in the Chinese market is very optimistic about the prospects. This is because, on the one hand, CTF currently has more than 2,000 retail outlets in the country, the next few years is also expected 500-1000 additional retail stores, on the other hand, Chinese diamond market growth remained consistent with the GDP growth, which on a global scale are relatively high growth rate. Therefore, China's consumption will continue to increase in the GDP growth of fashion jewelry market there is great potential .

In addition, the 'Global and found no new diamond mine, the entire diamond market will be in short supply, so we are very optimistic about China's diamond market. I believe the future, diamond revenue from the Chinese market will be more and more.' Davies said.

Currently, Rio Tinto's annual global diamond only 18 million karats per year contribution to Rio Tinto about $ 100 million (about 635 million yuan) in sales revenue, representing Rio Tinto nearly 10 percent of all revenue.

Davies to the 21st Century Business Herald reporter revealed that due to the current output of the Argyle diamond mine will be the largest in 2021 and shut down due to resource depletion, Rio Tinto is currently working to obtain in India Banda (Bunder) diamond mining and operations Right.

According to Rio Tinto reports, Banda ore reserves is expected to reach 53.7 million tons of ore, estimated diamond content of 34.2 million karats, will seek to build and put into operation in 2020.


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