Rio Tinto to sell stake in Clemont mine to Glencore Xstrata and Sumitomo for $1.015 bn

25 Oct 2013

Rio Tinto, the world's second-largest mining company, today said that it will sell its stake in the Clemont mine joint Venture to GS Coal Pty Ltd, a company jointly owned by Glencore Xstrata and Sumitomo Corporation, for $1.015 billion.

Under the terms of the sale, Glencore Xstrata will take over the management of Clermont Mine, which produces thermal coal in central Queensland.

The sale is subject to approval of Rio Tinto's joint venture partners, Mitsubishi Development Pty Ltd, J-Power Australia Pty Ltd and JCD Australia Pty Ltd on their pre-emption rights.

Rio Tinto Coal Australia currently manages the operation on behalf of the joint venture partners. Rio Tinto holds 50.1 per cent, Mitsubishi holds 31.4 per cent, J-Power Australia holds 15 per cent and JCD Australia holds the remaining 3.5 per cent.

The auction of the Clemont mine had attracted suitors like Aditya Birla Group, China's Shenhua Group, Dutch trader Trafigura and Australian coal-mining and energy company New Hope Coal, all of whom had bid below $850 million.

The Clermont mine, located in central Queensland, supplies international markets around 12 million tonnes of thermal coal.

The deposit holds 177 million tonnes of thermal coal, and the mine has an expected life of 17 years.

In June, Rio Tinto, which generates four-fifths of its earning from iron ore, had put some of its non-core assets for sale in order to lower its debt and focus on its iron ore operations in Pilbara, Australia, and the Simandou mine in Guinea, currently under development.

Rio Tinto had put its 29-per cent stake in its Coal & Allied operations and its majority stake in the Clermont mine in Queensland state on the block, which analysts opined could fetch the London-based miner around $3.2 billion.

Analysts had said that Rio Tinto's stake in Coal & Allied could fetch around $1.7 billion while the Clermont stake could bring in $1.5 billion, but bidders were not willing to pay $1.5 billion since coal prices have plunged by over 20 per cent since last year, from $130.62 per ton at the start of 2012 to around $85 this month.

With the sale of Clermont Mine, the Anglo-Australian miner has now announced or completed $2.915 billion of divestments this year, including its Northparkes copper mine in Australia to China Molybdenum for $820 million, and 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.

This month it sold its 71.2-per cent stake in the now closed Blair Athol coal mine in Australia to Linc Energy.

Rio Tinto chief financial officer, Chris Lynch said, "The sale of Clermont Mine will allow us to realise value for our shareholders as we continue optimising our portfolio. It also demonstrates our focus on strengthening our balance sheet and taking a disciplined approach to allocating capital across the Group.

The transaction is expected to close in the first quarter of 2014.