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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
Analyst Ratings
15 Sep 14 23:49:49
Rio Tinto plc's PT raised by Deutsche Bank to GBX 4,680. buy rating. http://t.co/k6Cq7Z7Ntp $RIO #RIO
US Consumer News
15 Sep 14 23:41:43
Rio Tinto plc's PT raised by Deutsche Bank to GBX 4,680. buy rating. http://t.co/8KSLKFqc4l $RIO #RIO
John Haakestad
15 Sep 14 23:03:07
RT @JSEtracker: Iron ore rebound seen by Morgan Stanley as Vale sees $100/ton http://t.co/cMroXPPB1b $VALE $RIO $BHP
Cratos Capital
15 Sep 14 22:46:05
Iron ore rebound seen by Morgan Stanley as Vale sees $100/ton http://t.co/cMroXPPB1b $VALE $RIO $BHP
Fe Limited
15 Sep 14 22:20:08
Bernstein report proposes Rio Tinto as Glencore takeover target http://t.co/QV4DJ9gZ5G $RIO $GLEN #ironore #metals #mining #ausbiz #EUbiz
Mijn Effecten B.V.
15 Sep 14 20:39:28
Iron ore rebound seen by Morgan Stanley as Vale sees $100/ton $VALE $RIO $BHP http://t.co/Jd9OpVdAHK
CMCMFIN
15 Sep 14 19:11:52
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Olessia Butenko
15 Sep 14 18:28:56
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
Zubeyr Kamil Açıksar
15 Sep 14 18:04:02
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
FinanzLinksASIA
15 Sep 14 18:01:51
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
Cheryl(Brown)-Howell
15 Sep 14 18:01:05
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
MKTWAsia
15 Sep 14 17:58:10
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
MarketWatch
15 Sep 14 17:58:10
RT @KitchenNews: Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
Michael Kitchen
15 Sep 14 17:58:02
Australia stocks slip, but iron-ore miners rally -- details here: http://t.co/lttX8QEMWI $XJO $AUD $BHP $RIO
CommSec
15 Sep 14 17:43:24
[CHART] Miners are keeping the ASX 200 fro falling further into the red $FMG +3%; $RIO+1% ; BHP +0.7%^TP Iress#ausbiz http://t.co/OCTZGSpohm
cyber chick
15 Sep 14 17:42:21
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Vanessa Dalton
15 Sep 14 17:22:30
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Ash
15 Sep 14 16:38:22
#XJO - Iron ore up 3.9% to USD85.20/t - positive for $RIO + $BHP #ASX #SPI
A Macdonald-Smith
15 Sep 14 16:12:45
$RIO subject of latest takeover speculation! #mining Rio Tinto touted as Glencore takeover target http://t.co/RhvgYpsNJ6
Dipen Rughani
15 Sep 14 16:03:33
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Bitcoin fxRevolution
15 Sep 14 15:55:48
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Margin
15 Sep 14 15:54:23
RT @FinancialReview: Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Financial Review
15 Sep 14 15:49:31
Rio Tinto seen as logical acquisition for Glencore $RIO http://t.co/4bWnzpEEVl
Thor
15 Sep 14 15:32:24
RT @CauldronEnergy: For 1st time overall cost of nuclear gen is now lower than that from #coal, #gas in coastal #China says $RIO boss http:…
Cauldron Energy
15 Sep 14 13:55:24
For 1st time overall cost of nuclear gen is now lower than that from #coal, #gas in coastal #China says $RIO boss http://t.co/o5NcUwtm7q
Jeffrey Szmit
15 Sep 14 12:01:50
@MarkMobius Mark what do you think of this #Mongolia tax #settlement being offered to $RIO? Love your commentaries! $trq #markets #trading
BNK Invest
15 Sep 14 11:34:26
$RIO January 2017 Options Begin Trading #stockoptions http://t.co/kay890olHC
MarketCurrents
15 Sep 14 09:42:44
Iron ore rebound seen by Morgan Stanley as Vale sees $100/ton http://t.co/IXJ5XmheJ9 $VALE $RIO $BHP
Anthony
15 Sep 14 09:42:26
RT @WallStJesus: $RIO SEP 52.5 calls opening action, 4300+
INVERTIR EN BOLSA
15 Sep 14 08:55:48
$GLD $SLV $NUGT $DUST $ABX $NEM $FCX $VALE $RIO $BHP - Is it time to buy gold? What will happen to GOLD this week? http://t.co/AGQUjLPcXF
awolam
15 Sep 14 08:25:09
RT @SeekingAlpha: BHP Billiton: Making All The Right Moves http://t.co/viPFpA8It0 $FSUMF $RIO $GLNCY $BHP
Seeking Alpha
15 Sep 14 08:22:38
BHP Billiton: Making All The Right Moves http://t.co/viPFpA8It0 $FSUMF $RIO $GLNCY $BHP
Options Activity
15 Sep 14 07:51:01
$RIO very heavy #options activity on the calls side #UOA #Stocks #Trading
Hariharan Vaidyanath
15 Sep 14 07:47:28
RT @WallStJesus: $RIO SEP 52.5 calls opening action, 4300+
JE$US
15 Sep 14 07:43:47
$RIO SEP 52.5 calls opening action, 4300+
ابو مازن
15 Sep 14 07:43:29
RT @OptionsFlux: $RIO SEPT CALL 52.5 #UOA detected at 0.8$
OptionsFlux
15 Sep 14 07:43:16
$RIO SEPT CALL 52.5 #UOA detected at 0.8$
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15 Sep 14 06:46:10
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15 Sep 14 06:27:00
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/LDkxSMPIkf
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15 Sep 14 06:26:51
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/EbTJfpTELs
FONTESRJ
15 Sep 14 06:26:38
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/B79nINJHXX
AFONSOALONSO
15 Sep 14 06:26:27
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/E7vOkwouwO
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$RIO - Correction to China Mining Story on Sept. 11 http://t.co/5Cl8oHof4C
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15 Sep 14 06:26:06
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/LNQNwTAnNJ
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15 Sep 14 06:26:01
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/KrBcjVVRHT
JOSÉ BRITO
15 Sep 14 06:25:51
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/nhJk2FweAB
Andre
15 Sep 14 06:25:35
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/iwGWYmKKas
RAFAEL MONTESANTI
15 Sep 14 06:25:28
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/l3GfVKtSff
Gabriel Badaró Pinto
15 Sep 14 06:25:11
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/kU1uA02DdC
diogenesmarcondes
15 Sep 14 06:25:01
$RIO - Correction to China Mining Story on Sept. 11 http://t.co/HTo3VshvfB
				
				
By  +Follow October 2, 2013 10:23AM
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