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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
IRJ Magazine
30 Sep 14 09:37:59
RT @Mineweb: Iron ore completes longest losing streak on record http://t.co/EvxFl7vvOB #ironore #steel #mining $BHP $RIO
Mineweb
30 Sep 14 09:24:43
Iron ore completes longest losing streak on record http://t.co/EvxFl7vvOB #ironore #steel #mining $BHP $RIO
Justin Pollock
30 Sep 14 08:49:33
Covering my $RIO short today. Ore still has downside but at 2.5X 2014 cash flow I don't like the risk reward
DOUG
30 Sep 14 05:56:36
@MadMoneyOnCNBC $BHP CODELCO $FCX $GLCNF $NEM $RIO $SCCO http://t.co/ozOB1LFy32
Mark
30 Sep 14 05:00:24
End of the Iron Age http://t.co/IQydCKVyxF $BHP $RIO $VALE
InterCooler
30 Sep 14 04:37:55
Rio Tinto plc PT Lowered to GBX 3,082 at Investec $RIO http://t.co/O10jNRHUEN
InterCooler
30 Sep 14 04:37:55
Rio Tinto plc Price Target Lowered to GBX 4,640 at Deutsche Bank $RIO http://t.co/PoArthWjIx
US Consumer News
30 Sep 14 04:37:43
Rio Tinto plc's PT cut by Investec to GBX 3,082. hold rating. http://t.co/2iBvqhU0od $RIO #RIO
WKRB News
30 Sep 14 04:37:43
Rio Tinto plc PT Lowered to GBX 3,350 at Barclays $RIO http://t.co/qYcttWnhRn
Analyst Ratings
30 Sep 14 04:34:48
Rio Tinto plc's PT cut by Investec to GBX 3,082. hold rating. http://t.co/coAbOxTar2 $RIO #RIO
Greg Bonnell
30 Sep 14 04:20:58
RT @forgefirst: How do $LIF $BHP $RIO say ouch? $GS predicts iron ore surplus 2 rise from 52M tons in 2014 to 163 million tons & $80 avg pr…
Andrew McCreath
30 Sep 14 04:18:32
How do $LIF $BHP $RIO say ouch? $GS predicts iron ore surplus 2 rise from 52M tons in 2014 to 163 million tons & $80 avg price in 2015 @BNN
FonsieTrader
30 Sep 14 04:16:12
Moved Lower Bollinger Band 2/3 $GE $GLW $GM $HOG $HSBC $INVN $IVZ $JBL $KATE $MPEL $MTG $MTU $OWW $PNR $RIO $RLGY http://t.co/fo2Elyh8QF
Precious Metal Feed
30 Sep 14 03:34:32
Liberum Capital Reiterates Buy Rating for Ashtead Group plc (AHT) $rio http://t.co/VEqLJwp8jM http://t.co/MUd3UF5rJl
AJHC
30 Sep 14 02:29:36
RT @SeekingAlpha: Rio Tinto: The Iron Age Isn't Over For This Miner http://t.co/thGYXol7QL $BHP $VALE $RIO
ashish
30 Sep 14 01:44:13
RT @Cape_Lambert: Prolonged #ironore price war will 'dash investor hopes', shareholders 'likely to pressure $RIO and $BHP' http://t.co/6eCC…
Seeking Alpha
30 Sep 14 01:35:37
Rio Tinto: The Iron Age Isn't Over For This Miner http://t.co/thGYXol7QL $BHP $VALE $RIO
Vijayanand. C
30 Sep 14 01:15:35
RT @Cape_Lambert: Prolonged #ironore price war will 'dash investor hopes', shareholders 'likely to pressure $RIO and $BHP' http://t.co/6eCC…
Cape Lambert
30 Sep 14 01:10:16
Prolonged #ironore price war will 'dash investor hopes', shareholders 'likely to pressure $RIO and $BHP' http://t.co/6eCCiFbwIp #returns
US Consumer News
30 Sep 14 00:18:17
Rio Tinto plc's PT cut by Deutsche Bank to GBX 4,640. buy rating. http://t.co/h2weMAPlcQ $RIO #RIO
Analyst Ratings
30 Sep 14 00:11:53
Rio Tinto plc's PT cut by Deutsche Bank to GBX 4,640. buy rating. http://t.co/J5lGEqt7SB $RIO #RIO
marco grisantelli
29 Sep 14 23:53:11
"@SeekingAlpha: Rio Tinto: Contrarian Investment At A Ridiculous Valuation? http://t.co/KMoaVL0HUj $BHP $VALE $RIO"
rob
29 Sep 14 23:37:32
$RIO daily oversold, weekly isn't though, important 50% level around here too #asx http://t.co/x3EqAtdzVF
Seeking Alpha
29 Sep 14 23:32:29
Rio Tinto: Contrarian Investment At A Ridiculous Valuation? http://t.co/iFSBIpkgyZ $BHP $VALE $RIO
David Williams
29 Sep 14 22:55:14
RT @CoverMongolia: Robert Friedland confident $Rio can mend relationship with #Mongolia | @smh, Sept 23 $TRQ http://t.co/qulBEVHroK http://…
Ё. Отгонбаяр
29 Sep 14 19:25:07
RT @CoverMongolia: Robert Friedland confident $Rio can mend relationship with #Mongolia | @smh, Sept 23 $TRQ http://t.co/qulBEVHroK http://…
Cover Mongolia
29 Sep 14 19:21:38
Robert Friedland confident $Rio can mend relationship with #Mongolia | @smh, Sept 23 $TRQ http://t.co/qulBEVHroK http://t.co/jLaQ4NIpT4
Cape Lambert
29 Sep 14 15:20:12
RT @MarkBuntingBNN: Iron ore producers lower with prices at 5-year lows on oversupply and weak demand from China. $BHP $RIO $VALE @BNN
andrew huston
29 Sep 14 11:55:46
RT @MarkBuntingBNN: Iron ore producers lower with prices at 5-year lows on oversupply and weak demand from China. $BHP $RIO $VALE @BNN
Mark Bunting
29 Sep 14 11:53:32
Iron ore producers lower with prices at 5-year lows on oversupply and weak demand from China. $BHP $RIO $VALE @BNN
janet gale
29 Sep 14 09:54:06
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/EjmMKKFGfJ
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29 Sep 14 09:54:04
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FONTESRJ
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AFONSOALONSO
29 Sep 14 09:53:54
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/CUAmKvLTfb
Cleber Silva
29 Sep 14 09:53:51
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/1aqu6Xhogj
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29 Sep 14 09:53:46
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29 Sep 14 09:53:44
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/BilOoktMqT
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29 Sep 14 09:53:32
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/1HJvNOjHO7
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29 Sep 14 09:53:21
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$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/CsxJI0euj2
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$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/XCuNNwYWrl
JOAO CESAR ANÁPOLIS
29 Sep 14 09:53:12
$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/qoySvvzSrP
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$RIO - LONDON MARKETS: Mining Stocks Slump In London On China Worries http://t.co/4ryuR0m6fg
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Trefis.com
29 Sep 14 09:07:43
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DavidMadden_IG
29 Sep 14 09:01:04
Hong Kong riots rattle Wall Street http://t.co/OYMPZxdcXD #FTSE #DOW $HSBA $STAN $RIO $STAN
Seeking Alpha
29 Sep 14 08:00:05
The New Commodity Kings: How The Commodity Markets Have Changed This Year http://t.co/HOjNVYE8h1 $JPM $GS $MS $DB $GLNCY $RIO $BHP
Myrollingstocks
29 Sep 14 07:35:05
We love this stocks $RIO http://t.co/EYupZD9nWH
				
				
By  +Follow October 2, 2013 10:23AM
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