Rio Tinto: Don't Miss This Diamond Producer's Mega Potential

| About: Rio Tinto (RIO)

Diamonds, they say, are a girl's best friend. The glamour, mystery and charm of a diamond can't really be surpassed by any other metal or stone. It is probably because diamonds are so rare, and to possess a piece of it is something that is cherished by everyone. It is probably why Rio Tinto (NYSE:RIO) now wants to tell its consumers the story behind each diamond they purchase. The mining company announced its new marketing campaign "Diamonds with a Story" during the JCK Luxury Show in Las Vegas.

The marketing campaign aims to narrate the story of the jewelry trade, how the diamonds are mined, who the people behind those shiny stones are and how diamonds land up in the market after being mined from Rio Tinto's locations across the world. According to Rio Tinto, each of its diamond is wrapped in cultural, historical and geological histories and this collective history is highlighted by the human struggle. This human condition behind each diamond that is sold by Rio Tinto will allow the consumer to learn more about how its jewels are ethical and honest.

This specific interest in telling the story behind diamonds to Rio Tinto's consumers probably stems from the fact that more than 75% of consumers care to know from where their diamonds come. Learning the story behind the jewelry they wear makes consumers feel better about themselves especially when diamonds are tainted by colossal human tragedies across the world. In fact, after watching Blood Diamonds, I began to have second thoughts about purchasing diamonds. However, when companies mine these stones ethically like Rio Tinto, one has no reason to feel guilty and can live life with a clear conscience.

Probably, Rio Tinto wants to capitalize on its excellent track record of not exploiting its workers and employees like most diamond mining companies have done. In fact, diamonds that are mined in countries like Sierra Leone are known to be handled by militias that often employ children. Money from these diamonds is used to buy weapons and to fund armed campaigns against citizens, governments and legal armies. These illegal diamonds end up in the markets of Europe and North America, through a shady route of smugglers, middle men and armed militia. Diamond mine workers in countries like Sierra Leone have been subjected to not only exploitation and threats but also unspeakable physical abuse and torture. The diamonds that originate from mines like the ones I just described are really blood diamonds.

Thankfully, much has been written and said about these tainted diamonds that people have started to question their origin. Though Rio Tinto has not specifically mentioned anything about the existing doubts about the origins of diamonds, it certainly must have given a thought about how best to clear doubts about its own diamonds in the international market. In my opinion, this is an extremely clever move to make as people would know from where their diamonds are sourced, how they are mined and what the human stories behind each diamond are.

Rio Tinto operates 3 diamond mines and has started exploration activity in a fourth one, and all of them have contributed well to respective local economies. The Argyle diamond mine in east Kimberley region of Western Australia is the world's largest producer of diamonds and belongs wholly to Rio Tinto. The mine handles almost one-fifth of all diamond production in the world. Rio Tinto has maintained cultural and economic relationships with the local communities and helped them to preserve the environment along with tapping natural resources.

The Diavik Diamond Mine in East Island, in Lac de Gras, Canada is yet another location where Rio Tinto produces these precious stones. This mine is wholly owned by the mining giant as well. The Murowa Diamond Mine in Zvishavane in South Central Zimbabwe is the only location in Africa where Rio Tinto produces diamonds. The mine has provided employment opportunities to Zimbabweans who have otherwise been stifled by dictatorial rule under Mugabe. The Bunder project in India is still in development and is expected to be Rio Tinto's showcase mine that would be world-class. The mine is expected to provide employment to communities in an especially backward region of India.

With stories like these, Rio Tinto will surely win people's hearts when it sells its diamonds. In fact, this is probably how a company should market itself, if its records are great. With all the terrible news that we get to read every day, a company that differentiates itself from terrible realities will certainly stand to gain a lot.

I am sure "Diamonds with a Story" will be a great marketing success, and will help Rio Tinto to set itself apart from its competitors. With respect to diamonds, Rio Tinto faces competition only from BHP Billiton (NYSE:BHP), De Beers Group and Alrosa. Of these 3 companies, I believe only BHP Billiton will have some effect on Rio's stock. BHP has a very lucrative diamond business centered around the Ekati Mine on Lac de Gras. BHP's mine is located about 300 kilometers from Yellowknife and Canadian diamonds are always in demand, because no blood is spilled and child labor is not used. Thus, Rio has competition with BHP that is not only centered around just diamonds, but also around ethical business practices. I believe this competition is necessary and sort of healthy, especially in an industry like mining. Other competitors like Vale (NYSE:VALE), Peabody Energy (BTU) and Cliffs Natural Resources (NYSE:CLF) do not offer much competition to Rio in terms of diamonds.

Creative marketing campaigns can do wonders to a company's stock, especially if the campaign manages to drive sales and improve brand image. Rio Tinto already has a very respectable image in the industry, and capitalizing on its flawless diamond mining practices would only help it to achieve further success. I expect "Diamonds with a Story" to help Rio Tinto to target informed and educated consumers who prefer purchasing jewels that would leave them with a clear conscience.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.