Newish Rio Tinto (RIO) CEO Sam Walsh has now raised more than $US1.1 billion from asset sales after the provisional sale of its 80% owned Northparkes copper mine in NSW to China Molybdenum Co for US$820 million.
Rio Tinto chief financial officer Chris Lynch said in a statement that, “The sale of Northparkes represents great value for our shareholders and demonstrates our continued focus and discipline in the way we allocate capital across the Group.
“Northparkes is a successful business but is not of sufficient size to be a good fit with our strategy. We believe it will have a strong future under its new ownership. Rio Tinto will continue to manage Northparkes to the highest safety and environmental standards during the transition to the new owner.
“The agreed sale of Northparkes follows our recently completed divestment of the Eagle nickel project in the United States while the Palabora sale is now unconditional and expected to close on 31 July. As always, any decision to sell is driven by our focus on delivering the best value for our shareholders," Mr Lynch said.
Earlier in the year, Rio agreed to sell the Eagle nickel and copper mining project in the US for around US$325 million in cash to Toronto-based Lundin Mining Corp.
The sale is subject to Rio Tinto’s joint venture partners, Sumitomo Metal Mining and Sumitomo Corporation Mineral Resources, waiving or failing to exercise their pre-emption rights under the terms of the Northparkes Joint Venture Agreement.
The sale is also conditional upon customary regulatory approvals such as the Foreign Investment Review Board, and the approval of CMOC shareholders.
Rio said it had received binding commitments from the two major CMOC shareholders holding 69% of the company’s shares to support the transaction, which is sufficient for the relevant shareholder resolutions to be passed.
The transaction is expected to be completed by the end of 2013.
Rio shares ended 13c lower on $57.11, so news of the sale (which has been coming for a while) had no real impact on the price.
RIO 1Y – Rio Tinto sells stake in the Northparkes mine in NSW
China Molybdenum is involved in the mining and processing, smelting, downstream processing, trade, research and development of molybdenum, tungsten and precious metals.
It is the world’s fourth largest molybdenum and second largest tungsten concentrate producer, and an emerging precious metals producer in China. Its major asset is the wholly owned Sandaozhuang molybdenum-tungsten mine located in Luoyang in China, which is one of the largest defined molybdenum reserves and second largest defined tungsten reserves in the world.
China Molybdenum will gain control of mine that produced almost 54,000 tonnes of copper last year and 72,000 ounces of gold.
One of the largest shareholders in China Molybdenum is Chinese private equity group Cathay Fortune, which has been involved in a contest for control of Discovery Metals, another Australian copper miner. State-owned Luoyang Mining is another large investor in China Molybdenum.
Because of these links, some sections of the Federal Opposition (such as Deputy National Party Leader, Barnaby Joyce) might agitate to reject the deal.
Rio recently decided to keep its diamond business after rejecting offers that apparently undervalued the business. The operation is valued around $US1.7 billion.
Rio revealed late yesterday afternoon more delays with its $US6.2 billion Oyu Tolgoi copper project.
It said it had been notified by the Government of Mongolia that the terms of the project financing provisionally secured for the underground development of Oyu Tolgoi will need to be approved by the Mongolian Parliament.
"The Mongolian Parliament is currently in summer recess and the parliamentary approval process may take some time to work through. Rio Tinto remains committed to working with the Government of Mongolia to secure project financing.
"However, in view of the current uncertainty, including continued discussions with the Government on a range of other issues, all funding and work on the underground development will be delayed until these matters are concluded and a new timetable has been agreed.
"In the meantime, Rio Tinto will focus on the continued safe, efficient and cost-effective management and ramp-up of the open pit mine and sustained export of Oyu Tolgoi concentrate to customers in order to deliver the associated benefits for all stakeholders," Rio said.
This effectively means that Rio will stop work on the $US5 billion expansion of the project underground for an unknown period of time.
