Rio Tinto Sheds Aussie Mine Stake
Rio sells out of Australian coal mine; New Hope Corp buys 40 pct stake for $606 million.
Global miner Rio Tinto (RTNTF) on Wednesday said it had agreed to sell its 40 percent stake in the Bengalla coal mine in Australia to New Hope Corp for $606 million, the latest shuffle of Australian coal assets amid a sector-wide downturn.
Rio has been looking to offload less profitable businesses to help fund its promise to raise dividends and focus on iron ore and copper mining amid a broad slump in commodities prices caused by slowing economic growth in China.
Bengalla is the smallest of three coal mines in the Hunter Valley near Sydney in which Rio Tinto is a stakeholder. It produced 8.6 million tonnes of coal in 2014.
New Hope, capitalised at A$1.37 billion ($959 million), said last week it was hunting for acquisitions after reporting a 25-percent rise in annual profit as cost cuts outweighed a drop in energy coal prices to six-year lows.
New Hope's stock jumped 7 percent to A$1.77 on Wednesday.
Analysts at Macquarie and Morgan Stanley (MS) said Rio had fetched a strong price for the Bengalla stake relative to their valuations of its coal assets.
Rio, advised by Deutsche Bank, earlier this year put all its coal stakes in the state of New South Wales up for sale.
Glencore Plc (GLNCY) is still seen as a front runner for the remaining stakes, despite concerns over its $30 billion debt pile, as it has mines in the same area that it has long sought to combine with Rio's to help cut costs.
Glencore could line up debt at the asset level, rather than the corporate level, to help fund a deal, as it did when it teamed with Sumitomo Corp (SUMA.BE) to buy Rio's stake in the Clermont coal mine for $1 billion in 2013, an Australian resources banker said.
Rio Tinto declined to comment on any talks or say how much profit it booked on the Bengalla sale.
Along with the sale, Japan's Mitsubishi Corp and Rio agreed to disband a coal joint venture in the Hunter Valley and take direct stakes in mines previously owned via the venture, making it easier for Rio to sell its holdings.
Mitsubishi declined to comment on whether it plans to sell the stakes it now has in the Hunter Valley Operations and Warkworth mines, but a spokesman said it sees energy coal demand growing in the medium to long term.
($1 = 1.4286 Australian dollars) (Reporting by Swati Pandey, James Regan and Sonali Paul