Well, that’s it for capital management deals helping shareholders in Rio Tinto after the giant miner finally sold its stake in the huge Grasberg copper mine in Indonesia for $US3.5 billion (A4.8 million) and will keep the money for itself.
The sale was announced on Friday night. The deal has been looming now for several months with only the final details to be nutted out. That has now been done.
Last month Rio Tinto revealed it would use most of the proceeds from the sale of its coal mining assets to fund a capital return and share buyback for its Australian and UK shareholders.
The company triggered a $US3.2 billion ($A4.4 billion) share buyback primarily focussed on its Australian-listed shares and topped up on a market buyback for its Plc holders based in the UK.
In the statement, Rio said that it had signed a binding agreement to sell its entire interest in the Grasberg mine in Indonesia to PT Indonesia Asahan Aluminium (Persero) (Inalum), Indonesia’s state mining company, for $3.5 billion. “Separately, Inalum has signed a binding agreement with Freeport McMoRan Inc. (FCX) in relation to the future ownership and operation of the Grasberg mine,” Rio stated.
Rio Tinto chief executive J-S Jacques said in the latest statement; “This agreement is a significant step towards the sale of our interest in Grasberg and provides further evidence of our commitment to strengthening the portfolio by selling non-core assets and driving higher returns across the business.
“We will continue to shape the portfolio, maintain a strong balance sheet and allocate capital to the highest value opportunities in order to ensure that Rio Tinto continues to deliver sector-leading returns to shareholders”.
Subject to a number of conditions being met such as regulatory approvals, Rio said it expects completion of both transactions is expected to occur in the first half of next year
“The proceeds of the sale are to be paid in cash to Rio Tinto at closing, with the funds to be used for general corporate purposes,” Rio said. So no more buybacks.
Rio shares closed at $78.76 on Friday, down 0.6% on the day and 0.9% for the week. September saw a solid near 8.3% rise, but for the quarter it was down 5.6%.
On Monday Rio Tinto revealed another round of spending on its Robe River Pilbara iron ore mines in WA, no doubt using some of the money it is reserving from the sale of its stake in the Grasberg mine in Indonesia.
The investment will see the employment of around 2,000 new jobs on the construction phase, which will tighten the already strained WA resource labour market.
Rio said that it and joint venture partners Mitsui and Nippon Steel & Sumitomo Metal, have approved an investment of $US1.55 billion (around $A2 billion) Rio Tinto’s 53 percent share $US820 million) “to sustain production capacity at two projects which form part of the Robe River Joint Venture in the Pilbara region of Western Australia.”
Rio said the partners will invest $US967 million (Rio Tinto share $US513 million) to develop the Mesa B, C and H deposits at Robe Valley, and $US579 million (Rio Tinto share $US307 million) in developing Deposits C and D at the existing West Angelas operation.
“These investments enable Rio Tinto to sustain production of the Pilbara Blend, the world’s most recognized brand of iron ore, and its Robe Valley lump and fines products, which are highly valued by long-term customers,” Rio said in a statement to the ASX.
Rio said production of first ore is currently anticipated from 2021.
Rio Tinto’s Iron Ore chief executive Chris Salisbury said in statement “The development at West Angelas will help sustain production of the Pilbara Blend, the industry’s benchmark premium iron ore product, while the additional Robe Valley deposits will enable us to continue to provide a highly valued product to our long-term customers across Asia.”
“The approval of these two projects highlights the strong pipeline of development options within our portfolio as we remain focused on our value-over-volume strategy,” he said.
