MINERALS powerhouse Rio Tinto is reportedly planning to sell off billions of dollars in thermal coal mine assets from two of its central Queensland sites, as well as its NSW-based Coal and Allied, via global finance company Deutsche Bank.
Sales are speculated to fetch about $2.8 billion for the British-Australian metals and mining corporation, with the company seeking a buyer for up to 29 per cent of its Coal and Allied unit, to cut costs and boost shareholder returns.
Deutsche Bank is also reportedly selling Rio Tinto’s interests in the Clermont and Blair Athol thermal coal mines in Queensland, which could fetch more than $1billion.
News of the sale broke via an unnamed executive reporting to the Wall Street Journal, and has since spread throughout wider media forces, though neither Rio Tinto nor Deutsche Bank have yet confirmed the rumour.
However, the news fit with statements made by Rio Tinto’s new chief executive officer Sam Walsh, who told shareholders in February the company would look to save $4.7 billion by the end of 2014 through a number of cuts including “an even more aggressive portfolio approach” to sell assets that did not fit with its future plans: Mr Walsh stated that the company wished to focus only on large, high-quality assets that it could expand.
Thermal coal, which is burnt to generate electricity, has become less attractive as a long-term investment for companies like Rio Tinto after prices tumbled to three-year lows in September. International prices for thermal coal fell from $120 per tonne at the beginning of 2012 to just $85 when it bottomed out in October.
“There’s been some speculation that they will try and exit thermal coal, it just doesn’t make sense for them.
They make all their money out of iron ore and thermal coal just doesn’t fit the model,” a coal industry executive, who asked not to be named, was reported in The Age. “The problem is, in this climate, who’s the buyer.”