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Rio Tinto Close to Selling Blair Athol Coal Mine in Australia

By  +Follow October 2, 2013 10:23AM
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Diversified global miner Rio Tinto PLC (RIO) has been looking for ways to divest some less-profitable assets in 2013 as a means to cut into debt that mushroomed to nearly $19 billion in 2012.  Namely, Rio has been trying to sell an iron ore mine in Canada and its interest in coal mines in Australia and Mozambique as prices for coking, or metallurgical, coal have plunged in the past year and a half.

The plan to sell assets was put in motion by Sam Walsh after he assumed the role of chief executive in January as a means to improve profits by focusing on its bigger mines and return value to shareholders.  Walsh’s scheme involves the company cutting costs by $5 billion by the end of 2014.

In July, Rio sold its majority stake in the Northparkes copper mine in Australia to China Molybdenum Co. Ltd. for $820 million.

When prices for coking coal, which is heavily used in steel manufacturing, were soaring in 2011 to hit $330 per metric ton in the second quarter, demand was high in Europe and China.  Since then, coking coal prices have been more than halved on growth concerns, cutting into producers’ profits.

In April, The Australian reported that Rio was looking to sell its 50.1-percent stake in the Clermont coal mine for $1 billion and also looking to sell its neighboring Blair Athol coal mine in Queensland.  Rio was also reported to be looking to slash its 80-percent interest in Coal & Allied Industries Limited by 29 percent.  In November 2011, Rio and Japan’s Mitsubishi Development Pty Ltd. bought the 10.2-percent stake in Coal & Allied that they didn’t already own for $3.13 billion.

Finding buyers at the asking price has been a challenge for Rio, even though coal prices are trying to eke upward.  Japanese steelmaker Nippon Steel Y Sumitomo Metal Corp. recently set its fourth quarter contract price for prime hard grade coking coals with Australian miners at $152 per metric ton, up by $7 from the third quarter.  Conversely, some analysts argue that abundance in supply will drive prices lower going forward.

The Wall Street Journal reported three days ago that Rio has fielded a few offers to buy its majority stake in the Clermont mine from three bidders, India’s Adani Enterprises, Australia’s New Hope Corporation and Dutch trading house Trafigura, but the highest offer has been $850 million, well short of the $1-billion asking price.

Today WSJ says that Rio is close to selling the Blair Athol coal mine to Brisbane, Australia-based, diversified energy company Linc Energy, according to a source close to the matter.  Financial terms of the deal were not disclosed.  Shares of Linc, which trade on the Australian exchange under the ticker “LNC” fell about 10 percent in Wednesday trading.

Shares of Rio Tinto are trading marginally ahead Wednesday at $46.67, up 15 cents in early action.  Shares have far underperformed the main indices in 2013, down by about 12 percent since the start of January, but investors will be looking for final news of a deal as it represents another solid step in some restructuring that could improve future share value.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for RIO
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22 Nov 14 22:28:15
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22 Nov 14 15:25:11
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Paolo
22 Nov 14 14:13:40
RT @SierraMorenaEx: Rio to spend $100M hunting for copper in Kazakhstan http://t.co/0JqNQeGHMB #coppermining #mining #metals #copper #stock…
Sierra Morena Expl
22 Nov 14 12:25:06
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22 Nov 14 08:47:22
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22 Nov 14 03:00:41
RT @AMcCaig_IG: So Japanese recession & Chinese Manufacturing PMI at 50 The miners leading the #FTSE lower. $VED $RIO $AAL $BHP http://t.c…
Tatya Bravo
22 Nov 14 02:31:36
Iron ore miners: Fe-ling forecasts http://t.co/KQT6fWFzEY $BLT $RIO $AAL
OTPicks.com
22 Nov 14 01:06:05
http://t.co/NYsxQOU64w jim50: RIO Gapped up +1.90 $RIO Last Price 47.51 Day: jim50 http://t.co/KFIf57KZuX http://t.co/NYsxQOU64w
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22 Nov 14 00:25:06
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21 Nov 14 23:52:17
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21 Nov 14 23:52:15
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21 Nov 14 23:07:10
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Extreme Stocks
21 Nov 14 19:22:51
Lucky Jimmy: RIO Stock up +4.86% percent Today $RIO High is at http://t.co/smAToVJ3th
Lucky Jimmy
21 Nov 14 19:11:40
RIO Stock up +4.86% percent Today $RIO High is at 48.06 and the Low 47.35 with current volume of 3,858,820. Re http://t.co/pr00CP11N2
Lucky Jimmy
21 Nov 14 19:11:18
$RIO RIO up +4.86% percent Today $RIO Stock High is at 48.06 and the Low 47.35 with current volume of 3,858,820. Re http://t.co/amnV40A4EF
clayton
21 Nov 14 18:42:45
RIO 47.51 Rio Tinto Plc $RIO added to my watch list. Right now with RIO I am watching the last price 47.51 Hig http://t.co/WowC0N3KAR
clayton
21 Nov 14 18:42:23
$RIO RIO 47.51 Rio Tinto Plc $RIO stock added to my watch list. Right now with RIO I am watching the last price 47. http://t.co/x08wF9nr7q
Investors Hangout
21 Nov 14 18:22:19
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Investors Hangout
21 Nov 14 18:22:19
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Investors Hangout
21 Nov 14 18:22:18
jim50: RIO Stock Gapped up +1.90 $RIO Last Price 47.51 http://t.co/Y648Tz8vl2
Investors Hangout
21 Nov 14 18:22:18
jim50: RIO Stock Gapped up +1.90 $RIO Last Price 47.51 http://t.co/rqUVOHRPhI
jim50
21 Nov 14 18:14:52
RIO Gapped up +1.90 $RIO Last Price 47.51 Day High 48.06 Day Low 47.35 Change +2.20 Volume 3,858,820 Today 593 http://t.co/LwX6ISm0yZ
jim50
21 Nov 14 18:14:29
$RIO RIO Stock Gapped up +1.90 $RIO Last Price 47.51 Day High 48.06 Day Low 47.35 Change +2.20 Volume 3,858,820 Tod http://t.co/5TMA0DXFVq
FinSentS UK100
21 Nov 14 15:20:55
$RIO:LN India to allow foreign firms mine and sell coal: report #RIO TINTO GROUP (GBP) http://t.co/0FwzimDUwm #LDN100
Sierra Morena Expl
21 Nov 14 14:42:37
Rio to spend $100M hunting for copper in Kazakhstan http://t.co/0JqNQeGHMB #coppermining #mining #metals #copper #stockmarket #shares $RIO
Henry Fung
21 Nov 14 14:18:45
@melbtrader I really hope you're not short $rio still....
US Banking News
21 Nov 14 13:28:09
Liberum Capital Reaffirms Sell Rating for Rio Tinto plc $RIO http://t.co/PhLIw15PnH
Sleek Money
21 Nov 14 13:22:08
Rio Tinto plc Receives “Sell” Rating from Liberum Capital $RIO http://t.co/ddsv6fXtVv
US Consumer News
21 Nov 14 13:14:58
Rio Tinto plc (ADR)'s sell rating reiterated at Liberum Capital. http://t.co/pqxccxY7vC $RIO #RIO
Analyst Ratings
21 Nov 14 13:04:46
Rio Tinto plc (ADR)'s sell rating reiterated at Liberum Capital. http://t.co/RTakT8HJoV $RIO #RIO
US Banking News
21 Nov 14 12:58:08
Rio Tinto plc Given “Sell” Rating at Liberum Capital $RIO http://t.co/MtMLuob9qF
Trefis.com
21 Nov 14 12:46:34
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Cramer's Watch
21 Nov 14 12:04:08
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By  +Follow October 2, 2013 10:23AM
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