Anglo-Australian mining giant Rio Tinto Plc (RTNTF, RIO, RIO.L, RTPPF) Wednesday announced that it has reached a binding agreement for the sale of its 40 percent interest in the Bengalla coal Joint Venture in Australia to New Hope Corporation Limited for $606 million.
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The agreed sale of Bengalla is part of a change in ownership of Coal & Allied, a joint venture between Rio Tinto and Mitsubishi Development.
“It demonstrates our commitment to further strengthening our balance sheet, maintaining a disciplined approach to allocating capital across the group, and delivering strong returns to shareholders through the cycle”, said Rio Tinto copper and coal chief Jean-Sebastien Jacques.
It signals Rio has abandoned a clean sale of the whole Hunter business, instead favouring partial sales.
The Bengalla mine is the smallest of three coal mines in the Hunter Valley that the Anglo-Australian miner has an interest in through Coal & Allied. It produced 8.6 million mt of thermal coal in 2014.
The transactions come amid soft demand for coal, oversupply and low prices.
Australia-listed New Hope said Bengalla was competitively positioned on the global export thermal coal cost curve and had a 25-year lifespan at current production levels, underpinned by 218 million mt of marketable coal reserves.
“What is important is to look at value – which is related to quality of assets as well as the price”, he said, tipping that the next 12 months would see a rise in coal deals.
Analysts at Macquarie and Morgan Stanley said Rio had fetched a strong price for the Bengalla stake relative to their valuations of its coal assets.
Mr Stephan last week insisted the lack of distressed sellers was not be a stumbling block.
The transaction was dependent on various conditions being met, such as the pre-emption rights of the Bengalla Joint Venture partners.
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Under the terms of this deal, Mitsubishi agreed to sell its 20% stake in Coal & Allied to Rio Tinto in exchange for a direct 32.4% interest in the Hunter Valley Operations mine.
