Rio Tinto's Diamond Profits Rise in 2018 Despite Revenue Decline
Rio Tinto's 2018 diamond profits increased by 28% to $118 million from $92 million a year earlier despite a slight downtick in revenues from diamond sales, which fell 1.6% to $695 million from $706 million in 2017. The miner's earnings before interest, tax, depreciation and amortization (EBITDA) increased 4.9% to $301 million from $287 million in 2017, while capital expenditures declined 25% to $64 million..
Diamond production overall was 15% lower than in 2017. At the Argyle mine in Australia, production of just under 14.1 million carats was 18% less than 2017, when Rio Tinto enhanced production by processing higher grade alluvial tailings. At the Diavik mine in Canada, production of just under 4.4 million carats was 3% lower than in 2017, with lower recovered grades partially offset by higher ore processing.The A21 project at Diavik successfully mined its first ore in March 2018 and reached commercial production during the fourth quarter. Rio Tinto has set its diamond production guidance for 2019 at between 15 and 17 million carats.
The miner commented that, "The global supply of natural rough diamonds in 2018 was lower than 2017. We expect this trend to continue into 2019, as new sources of supply are unable to satisfy growing demand. We saw a reduction in miners inventories over the first half of the year, coinciding with improved prices. However, in the latter part of 2018 there was an increase in inventories, predominantly of lower quality rough diamonds. This led to a softening of prices, particularly in lower-end categories."