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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for RIO
FinBuzz
2 Sep 15 02:07:55
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InfoTrie
2 Sep 15 01:54:22
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InfoTrie
2 Sep 15 01:50:09
$RIO:LN Broker puts buy call on Fortescue Metals Group Limited #RIO TINTO GROUP (GBP) http://t.co/4zaUzWedOg #STOXX600
Natascha Crundwell-U
1 Sep 15 23:54:04
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FinSentS Euro 600
1 Sep 15 23:21:18
$RIO:LN Broker puts buy call on Fortescue Metals Group Limited #RIO TINTO GROUP (GBP) http://t.co/yTzuHyUWxg #STOXX600
FinSentS UK100
1 Sep 15 23:15:30
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Makayla Lewis
1 Sep 15 22:33:17
RT @mining_metals: Gold Up on Safe-Haven Demand Amid World Stock Market Sell Off > $NUGT $SPY $QQQ $IWM $DIA $DJIA $STUDY $NEM $AUY $NG $CD…
The Legacy News
1 Sep 15 22:28:10
Rio Tinto plc Receives Outperform Rating from Sanford C. Bernstein $RIO http://t.co/j9qAisE8ww
Mark Plackett
1 Sep 15 19:32:56
RT @Mick_Peel: Freeport-McMoRan Inc. fell by 8.2% on Wall Street last night - $FCX & $RIO control Grasberg gold mine in West Papua http://t…
Breaking News Now
1 Sep 15 19:17:02
$BHP $RIO $EWA: Australia GDP Disappoints, Aussie Falls Through 0.70: http://t.co/mnXtIbOTtu
Mark Brant
1 Sep 15 17:43:50
RT @Financial_Orbit: Rio Tinto and BHP Billiton – interesting director share purchases https://t.co/HyIrpHNga0 via @sharethis $BHP $RIO
Mick Peel
1 Sep 15 17:08:18
Freeport-McMoRan Inc. fell by 8.2% on Wall Street last night - $FCX & $RIO control Grasberg gold mine in West Papua http://t.co/ZNbPbOlKhO
WealthEsteem.Org
1 Sep 15 16:10:12
$RIO:ASX 08:34 AM Transaction in Own Shares http://t.co/6p5ray8uPD
FinBuzz
1 Sep 15 14:51:44
What moves #FTSE 100 - sentiments, analysis or influential tweets? $HSBC $VOD $RIO http://t.co/LfC1vQyWUs http://t.co/O7y2w7zGo6
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1 Sep 15 11:32:18
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1 Sep 15 11:32:17
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1 Sep 15 11:32:15
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1 Sep 15 11:32:12
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1 Sep 15 11:32:10
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1 Sep 15 11:32:10
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1 Sep 15 11:32:07
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diogenesmarcondes
1 Sep 15 11:32:05
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JOAO CESAR ANÁPOLIS
1 Sep 15 11:32:04
$RIO - Rio Tinto contribue financièrement à la construction du pavillon dédié à la culture autochtone http://t.co/8VfWEYftX5
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1 Sep 15 11:32:03
$RIO - Rio Tinto contribue financièrement à la construction du pavillon dédié à la culture autochtone http://t.co/XRJaOuoydo
Marcio Castro
1 Sep 15 11:32:02
$RIO - Rio Tinto contribue financièrement à la construction du pavillon dédié à la culture autochtone http://t.co/2iLXyOmXGf
Dimitra DeFotis
1 Sep 15 10:50:28
Freeport-McMoRan Citi Downgrade: Sell #Energy Assets, $FCX Up 20% http://t.co/A4qYLoaXiw $VALE $RIO #commodities #mining @barronsonline
AdvantageData
1 Sep 15 10:06:37
Rio Tinto PLC $RIO off 5.8%, Anglo American PLC $AAL down 7.95%, Burberry Group was off 4.6% $BRBY, and Christian Dior $CDI lost 3.45%
RJ
1 Sep 15 10:02:27
RT @mining_metals: Gold Up on Safe-Haven Demand Amid World Stock Market Sell Off > $NUGT $SPY $QQQ $IWM $DIA $DJIA $STUDY $NEM $AUY $NG $CD…
King of investments
1 Sep 15 09:53:34
Freeport McMoRan downgraded to Neutral from Buy at Citigroup http://t.co/t4xf3sKNQ8 $FCX, $BHP, $RIO, $VALE, $TCK
janet gale
1 Sep 15 09:36:02
$RIO - Rio Tinto PLC Transaction in Own Shares http://t.co/eGCBNMZNQt
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1 Sep 15 09:21:02
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Mining Metals Market
1 Sep 15 08:37:58
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leahanne
1 Sep 15 08:26:39
Volume Alert - RIO 34.71 Rio Tinto Plc $RIO Hit a high today of 35.29 Closing the day 10:30 at 34.71 -2.01 -5. http://t.co/WTCuG6CZnz
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1 Sep 15 07:55:23
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1 Sep 15 07:26:43
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1 Sep 15 07:23:12
Rio Tinto plc Downgraded by Vetr Inc. to “Hold” $RIO http://t.co/SjDeiwxkZX
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1 Sep 15 07:23:02
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1 Sep 15 07:11:08
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1 Sep 15 06:36:42
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Jason Olive
1 Sep 15 06:29:05
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1 Sep 15 06:26:25
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By  +Follow October 2, 2013 10:23AM
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