Aditya Birla, Vedanta may bid for Rio Tinto’s stake in Iron Ore Company of Canada: report
16 Mar 2013
Aditya Birla Group and Vedanta Group are in talks with bankers to evaluate a bid for Anglo-Australian miner Rio Tinto's stake in Iron Ore Company of Canada (IOC), the Business Standard today reported.
Early this month, Reuters had reported that London-based Rio Tinto 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.
A sale could value IOC at $3 billion to $4 billion, putting the value of Rio Tinto's stake at over $1.8 billion, the report had said.
The potential sale comes a few months after steel giant ArcelorMittal sold a 15-per cent stake in Canada's Labrador Trough iron ore mining to a consortium led by S Korean steelmaker Posco for $1.1 billion, and a 20-per cent stake in Baffinland Iron Mines to its joint venture partner Nunavut Iron Ore.
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 a Bloomberg report today, 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.
Aditya Birla Group's mining subsidiary Essel Mining & Industries has been recently looking at overseas acquisitions in order to be self sufficient in the key raw materials for its proposed integrated steel plant at Jharkhand.
Set up in 1950, Aditya Birla Group's Essel Mining is among India's largest iron ore mining companies. It is also into coal and contract coal mining and dolomite mining.
Last year Essel Mining had walked away from acquiring Australian junior miner Northern Iron Ltd after finding continued variability in production at its Sydvaranger Iron Ore Project in northern Norway. (See: Aditya Birla Group, Prominvest drop plans to acquire Australia's Northern Iron).
