Rio Tinto may abandon Canadian iron ore assets sale

Anglo-Australian mining giant Rio Tinto Plc may hold on to its majority stake in Iron Ore Co of Canada (IOC), after receiving bids that it finds low from interested suitors, including India's Aditya Birla Group.

The move comes two months after Rio Tinto also abandoned plans of divesting its diamonds business worth $2.5 billion, since selling commodity assets has become tough in a depressed global economy.

In March, the London-based miner had hired investment banks Credit Suisse and Canadian Imperial Bank of Commerce to sell its 59.7-per cent stake in IOC, Canada's largest iron-ore producer.

Early last month, Vedanta Resources pulled out of the race, but companies that reportedly tabled bids included Aditya Birla Group, private equity firm Blackstone Group, Canada's second-largest miner Tech Resources and Canadian pension funds CPP Investment Board and Caisse de depot et placement du Quebec.

Rio Tinto, like other mining giants BHP Billiton and Anglo American, has cut capital expenditure plans due to a slump in commodity prices and mounting debt.

Rio Tinto chief executive Sam Wash has been trying to reduce the company's debt burden through various measures including selling non-core assets and focusing on more profitable ones like its iron-ore mines in Australia's Pilbara region.

Last month it sold its two struggling aluminium plants in France to Germany's largest aluminium producer, Trimet Aluminium SE, and French state-run utility EDF, for an undisclosed sum, and reached an agreement to sell its majority stake in the Northparkes copper mine in Australia to China Molybdenum Co, for $820 million.

IOC is the largest manufacturer of iron ore pellets in Canada, with North America, European and Asian steel producers as it customers.

The company operates a mine, concentrator and a pellet plant in Labrador City, Newfoundland and Labrador, as well as port facilities located in Quebec. It also operates a 418km railroad that links the mine to the port.

It recently spent $800 million in expansion in order to increase annual iron-ore output capacity to 26 million tons, but even that is nowhere near the 353 million tons that Rio Tinto plans to extract annually from the Pilbara by mid-2015.

IOC contributed $230 million net profit to Rio Tinto in 2012, compared to $9.2 billion for the whole of its iron ore operations.