Rio Tinto signals coal exit with Australia sale

In the face of tumbling prices and wild volatility in commodities markets the Anglo-Australian firm, the world's number-two miner, has embarked on a cost-cutting programme and reduced spending to shore up its bottom line.

Rio Tinto signals coal exit with Australia sale

World Bulletin / News Desk

Rio Tinto has sold most of its underperforming Australian coal assets to China-backed Yancoal in a deal worth up to US$2.45 billion as part of a divestment drive analysts expect will lead to a complete exit from the sector.

The latest deal will see Coal & Allied, operator of several mines in New South Wales, sold to Yancoal Australia, which is majority controlled by China's Yanzhou Coal, one of China's largest mining groups by market capitalisation.

The agreement would mean Rio has now sold more than US$7.7 billion in assets since early 2013.

Fat Prophets resources analyst David Lennox said it was likely Rio would also sell its remaining coal assets, which are in Queensland state.

"If you have a look at the assets that are inside Coal & Allied, the profits that it generates, it's obviously not reaching the hurdle rate that Rio would have on its assets," he said.

"Hence they probably reckon it's probably better to... take the cash and deploy it elsewhere in the business. It's primarily a move away from that sector.

"It looks purely like Yancoal are wanting to get more critical mass in the industry," Lennox told AFP.

"They've seen a lift in the coal price from early last year and they believe that the Coal & Allied operations, which are very much near their own, would be a good match."

And Richard Knights, a mining analyst at Liberum Capital Ltd. in London, told Bloomberg News: "It was kind of getting to the point where thermal was irrelevant, they’re an iron ore, copper, aluminum and industrial-minerals business. Now is a fantastic time to offload coal assets.”

Güncelleme Tarihi: 25 Ocak 2017, 09:19