Rio Tinto PLC (RIO) said Monday it is selling its majority stake in a
copper-and-gold mine in Australia for US$820 million to a Chinese
resources company, in its latest move to bolster its balance sheet amid a
global slowdown in commodities demand.
Rio Tinto said it had reached a binding agreement to sell its
80% stake in the Northparkes mine to China Molybdenum Co. (3993.HK). The
deal hinges on units of Japan's Sumitomo Corp. (8053.TO), which
together own the remaining 20% interest, waiving their right to match
the offer.
"Northparkes is a successful business but is not of sufficient
size to be a good fit with our strategy," said Chris Lynch, Rio Tinto's
chief financial officer.
Rio Tinto has pledged to slash costs and spending in order to
protect a single-A credit rating and lift shareholder returns. Rival
mining companies, including BHP Billiton Ltd. (BHP) and Glencore Xstrata
PLC (GLEN.LN), are also selling assets as prices of commodities like
copper and coal remain weak due largely to slower growth in China's
economy.
Last month, Rio Tinto said it will sell a nickel and
copper-mining project in the U.S. to Toronto-based Lundin Mining Corp.
(LUN.T) for about US$325 million. The U.S. deal represented the
company's first disposal of an asset since Sam Walsh took over as chief
executive in January.
The Wall Street Journal in April reported the London-based
company had hired Macquarie Group to find a buyer for its stake in
Northparkes. South African investment bank Investec has estimated Rio
Tinto could raise between US$19 billion and US$22 billion from the sale
of various assets, including about US$650 million for Northparkes.
Rio Tinto acquired the asset as part of the 3.5 billion
Australian dollar (US$3.2 billion) acquisition of North Ltd. in 2000,
outbidding Anglo American PLC (AAL.LN). The mine exports most of the
copper concentrate it produces to customers in Japan, China and India.
According to Rio Tinto, extensions to the mine since it began production
in 1994 have extended its expected life to 2024.