GlencoreXstrata, Blackstone Group eye Rio Tinto’s stake in Iron Ore Co of Canada
03 Jun 2013
Commodities and mining giant GlencoreXstrata Plc and private-equity firm Blackstone Group are among the interested suitors eying Rio Tinto's stake in Iron Ore Co (IOC) of Canada.
The Wall Street Journal today reported, citing sources, the two suitors and other potential buyers have submitted bids for Rio Tinto's 59-per cent stake in the Iron Ore Co, which analysts at Bank of Montreal estimate is worth around $4 billion, valuing the entire business at around $7 billion, said the report.
Early this year, Rio Tinto had hired investment banks Credit Suisse and Canadian Imperial Bank of Commerce to sell its entire majority stake in IOC, the country's largest iron ore producer.
Aditya Birla Group and Vedanta Group were also reported to be in talks with bankers to evaluate a bid for the Anglo-Australian mine's stake.
Other stakeholders in IOC are Japan's Mitsubishi Corp with 26.2 per cent and Labrador Iron Ore Royalty Income Corp with 15.1 per cent.
According to an earlier report from Bloomberg, Teck Resources Ltd, Canada's largest diversified mining company may emerge as the lead bidder for IOC.
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.
IOC has 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.
Rio Tinto's newly appointed CEO Sam Walsh had earlier said that he would sell non-core and under-performing assets to bolster the balance sheet of the company.
Rio Tinto, which generates four-fifths of its earning from iron ore, may be selling IOC for its lower grade of ore, and focus on the higher grade ores at Pilbara in Australia and its under development Simandou iron ore mine in Guinea.
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