RIO TINTO is under increasing pressure from its clients to review the prices of its diamond supply contracts in the face of difficult market conditions.
A number of banks and customers of Rios Argyle diamond production are understood to have pressed the worlds second largest diversified mining company to lower the prices of diamonds sold under the contracts, which came into effect only three months ago.%%The three year contracts, which are the first to be legally binding and linked to a floor price in the predominantly handshake diamond industry, formed an important part of Rios decision to invest $900 million in the life extension of its Australian Argyle mine.
%%The contracts are also aimed at providing Rio, which has been mining and selling diamonds since 1982, a degree of certainty in terms of sales revenue based on a bullish long term outlook for the diamond market.%%With one more sale before the Indian Diwali holidays in October/November, and a severe liquidity crisis in the rough market, the short term outlook on prices for Argyle diamonds looks all but rosy for Rio and its customers.