Rio Tinto delays Argyle decision

Vancouver — A final decision by Rio Tinto’s (RTP-N) board on whether the Argyle diamond mine in Western Australia should develop into an underground operation has been deferred until later this year.

Delays in sinking a 2.4-km exploration decline have been cited, as have escalating costs for construction of a tunnel, now estimated at about A$100 million.

Rio Tinto’s board was originally scheduled to make its decision by mid-2005 to approve underground mining at the world’s largest diamond producer (by carat, not value). Cost estimates for the initial phase of development, which include block-caving, have swollen to US$800 million from US$600 million due to rising costs of labour, material and fuel.

Production from the current open pit is expected to cease by 2008. Initial block-caving could extend Argyle’s production by about a decade to 2017, with later-stage, sub-level caving potentially adding another seven years of mine-life.

For the first half of 2005, Argyle produced over 18 million carats of diamonds, up almost 200% from the corresponding period in 2004 when lower-grade ore was processed. About 4.7 million tonnes of ore was processed in the recent half, giving a recovered grade of over 3.8 carats per tonne.