Rio Tinto: The Oldest Diamond Mining Company
Rio Tinto: The Oldest Diamond Mining Company
Posted by Rebecca B. on 17th Feb 2021
Rio Tinto is a global corporation that specializes in diamond exploration, mining, and trade. The company boasts an excellent reputation across established and emerging markets, largely due to the superb quality of their diamonds. Their diamond business is made up of thousands of workers operating from various regions around the world.
Rio Tinto is the preeminent explorer and supplier of both white and colored diamonds. Besides, the company is a great steward of the environment and pursues their mining activities in a manner that preserves and upholds the health and safety of the local communities. Rio Tinto’s business model is mainly based on forging strategic partnerships with other reputable diamond explorers.
Rio Tinto was established in 1873, making it one of the oldest diamond mining and exploration companies in the world. In the same year, a consortium of jewelry investors came together and purchased a mine complex located in Rio Tinto, Spain. At the time, the complex was still under the management of the Spanish government.
When Rio Tinto was established, it was purely a diamond-mining firm. But as the company’s fortunes grew, there was a need to diversify into other sectors. With time, Rio Tinto expressed an interest in the mining of other minerals, such as copper, aluminum, iron ore, and uranium.
But Rio Tinto did not stop there, and besides the exploration and extraction of minerals, began refining bauxite and iron ore. Today, Rio Tinto operates across six continents, though the bulk of their exploration activities are concentrated in Canada and Australia. It has operational offices in strategic cities around the world, including London, Melbourne, and New York. Like other global mining companies, Rio Tinto owns a chain of companies, either wholly or under joint partnerships..
The History and Origin of Rio Tinto
The Rio Tinto company may have been established in 1873, but the region’s profile as a diamond center goes way back.
Documented records suggest that mining activities around the Rio Tinto region in the Spanish Andalusian province may have existed from prehistoric times. However, mining operations were not carried out in abundance there at the time, and instead, the site was used mainly to explore minerals like gold, copper, and silver. Iberians and Tartessians were the first people to explore the site in around 3000 BC. Later on, the Phoenicians, Romans, Greeks, and Moors followed suit.
As more people expressed interest in the activity, most of the mining sites were depleted, and at one point, all mining undertakings in the region ceased. But in 1556, the mining sites were rediscovered. At the time, independent firms and individuals mainly carried out mining explorations. The Spanish government, however, took control of all mining ventures around the Rio Tinto area in 1724, soon to confront severe financial and logistical challenges in operating the mines. The best recourse for the government was to sell them off.
On 14th February 1873, the Spanish government held an auction that saw Matheson and Company purchasing the Rio Tinto mines. Matheson & Company was a syndicate comprising Matheson, Deutsche Bank, and the Clark, Punchard, and Company. Immediately after acquiring the mine, the syndicate established the Rio Tinto Company, registered on 29th March 1873. Rio Tinto’s new owners embarked on a series of more explorations around the region and continually innovated newer and better mining techniques. Their efforts luckily paid off.
Between 1777 and 1891, Rio Tinto was the most successful mining corporation in the world and controlled the global diamond prices for years on end. The firm determined when to hoard their merchandise and when to release them to the global markets. Be that as it may, their stranglehold on the diamond industry received a massive blow in 1914, the year the First World War began. When the war came to an end in 1918, Rio Tinto had lost significant segments of their diamond market, most notable being the US market. The company’s fortunes continued to dwindle until the appointment of Auckland Geddes as the chairman in 1925.
The new manager came up with drastic marketing and organizational reforms and was keen on penetrating other global markets. It is during his tenure that Rio Tinto entered joint ventures with like-minded companies. One of Geddes’s most notable achievements was the steering of Rio Tinto into investing in copper mines in Zambia. But in 1950, Francisco Franco, the then dictator of Spain, came up with somewhat obnoxious nationalistic ideals. One of his radical principles was the prohibition of resources produced within Spain from being used outside the country. As a result, Rio Tinto divested most of their Spanish operations. The company is presently headquartered in London, UK.
Rio Tinto Operations
Presently, Rio Tinto has a massive interest in two main underground mines. The mines are the Argyle mine located in Western Australia and the Diavik mine in the Northwest Territories of Canada. Argyle mine is the older of the two mining sites and has been in operation since 1983. On the other hand, activities at the Diavik mines began more recently, in 2003.
The Argyle Diamond Mine produces more than 90% of the world’s pink diamonds. From 1983 to date, over 800 million carats of rough diamonds have come from this site. But if one were to visit the mine, one would be astonished to observe that less than 1% of the diamonds there are pink, making pink diamonds some of the rarest and thus the most expensive. Indeed, certified Fancy Vivid Pink diamonds are thought to fetch as high as $100,000, which explains why most of them are often sold at auctions. The fact that Rio Tinto accounts for the lion’s share of the global trade of pink diamonds speaks to their success as a diamond explorer.
The 1.56-carat fancy red Argyle Phoenix holds the record of being the most expensive diamond ever to have come out of the Argyle mine, costing $2 million.
Besides giving us the Argyle Phoenix, the mine holds a few other records. For instance, it was here that Pink Jubilee, Australia’s largest pink rough diamond, was discovered; a stone that weighed a whopping 12.76 carats before polishing and 8.01 carats afterward. Besides pink diamonds, the Argyle mine also produces brown diamonds, and interestingly, up to 80% of diamonds that are mined here are brown. Of particular interest of these brown diamonds are the champagne diamonds; an elegant variety characterized by a yellow tone.
The Diavik Diamond Mine may not be as productive as Argyle, primarily because mining activities here commenced much later. However, the mine is famous for its white gem-quality diamonds. Operation of the Diavik mine is a joint venture between Rio Tinto and Dominion Diamond Corporation. Under this arrangement, Rio Tinto enjoys a 60% stake while Dominion takes the remaining 40%.
Besides these two mining sites, Rio Tinto also owned the Murowa Diamond Mine between 2004 and 2015. Over that duration, the mine’s annual production was 400,000 carats of white diamonds. During the same period, Rio Tinto held a 78% stake. It would later sell its interest to RZ Murowa Holdings Limited in June 2015.
Like we mentioned before, diamonds are not the only minerals in which Rio Tinto has interests. The company also explores aluminum, copper, uranium, coal, gold, borates, etc.
Management and Organizational Structure
Rio Tinto is a dual-listed company, having been listed on the Australian Securities Exchange and the London Stock Exchange under the names Rio Tinto Limited and Rio Tinto Plc respectively. Though it is a dual-listed company, Rio Tinto’s shareholders enjoy equal ownership rights and economic interests. The company implemented this model to ensure management efficiency. Also, this ingenious arrangement cushions the firm from adverse tax implications.
The fact that Rio Tinto operates from two distinct locations presents conflicts in currency exchange. Thankfully, the company adopted one neutral currency—the US Dollar, and hence they keep all of their company accounts, and pays dividends, in USD.
Regardless of Rio Tinto’s dual-listings status, the corporation has a consolidated management unit. At the apex of the company’s managerial structure is a Board of Directors that comprises both executive and non-executive committee members. The executive committee is made up of heads of the various operational units of the company.
Corporate Social Responsibility
Rio Tinto’s business model is inclined towards giving back to society. For this purpose, the company always has a couple of ongoing community development projects. As may be expected, they focus on the local areas where their mines are based, such as the Pilbara towns that neighbor their Australian mines. To improve the welfare of the indigenous groups, the company undertakes a series of socially-responsible financial investments. Furthermore, where the situation calls for it, they also give in-kind donations.
Rio Tinto is always happy to accept proposals from local community facilitators on the areas of development to prioritize, say, education, health, or the environment. Upon receiving the recommendations, the company embarks on a feasibility test before fully or partially supporting the project. Besides supporting local groups, Rio Tinto also takes part in government projects, but only such as are inclined towards building community capacity. The company does not engage in mainstream government services that the state traditionally funds.
Rio Tinto enjoys a history spanning over a century. Over the years, it has continued to explore some of the world’s richest diamond deposits. The company prides itself on supplying most of the world’s pink diamonds. Its success can be attributed to its innovative mining technology, progressive management ideas, and a consumer-based approach to sales.