--Rio Tinto's unit seeks buyer for 57% Ivanhoe Australia stake
-sources
--Move is in line with Rio Tinto's plans to sell non-core
assets
(Adds confirmation from Ivanhoe Australia.)
By Cynthia Koons and David Winning
Rio Tinto PLC (RIO) is accelerating a plan to sell billions of
dollars in non-core assets despite a slowdown in commodities that
could lower the price tag on the deals, with an Australian copper
and gold producer controlled by one of its units becoming the
latest to go on the block.
Citigroup has been appointed to run the sale of the 57% stake in
Ivanhoe Australia Ltd. (IVA.AU), which is controlled by Rio Tinto's
majority-owned Turquoise Hill Resources Ltd. (TRQ.T), people
familiar with the matter said.
The stake sale would be one of a string of divestments sought by
Rio Tinto's new chief executive. Citigroup is also running
Turquoise Hill's planned sale of its roughly 58% stake in SouthGobi
Resources Ltd. (1878.HK), a Mongolian coal miner, the people said,
but that process has been delayed until further notice.
Ivanhoe Australia's most recent market value is 148.7 million
Australian dollars (US$156.5 million). The company was worth as
much as A$1.5 billion in early 2011, but declining commodity prices
have weighed heavily on the stock.
Ivanhoe Australia confirmed the planned sale Thursday. It said
in a filing to the Australian Securities Exchange that Turquoise
Hill Resources has begun a strategic review of its ownership in
Ivanhoe Australia.
Ivanhoe Australia produces copper and gold and has a pipeline of
development projects. The main projects under development are Mount
Elliott and the Merlin project, which contain gold and base metals,
including copper. The sale could trigger a full takeover of the
company. Corporate law in Australia dictates that in most instances
a buyer that acquires 20% of a company must bid for a full
takeover.
SouthGobi is sitting on potentially 800 million metric tons of
coal resources, but has been at the center of a political battle in
Mongolia. The government a year ago said it had suspended the
company's mining and exploration licenses, citing national security
concerns, but in September wrote to the company to say all its
licenses were in order. SouthGobi said operations at its flagship
coal mine had resumed last month. Aluminum Corp. of China Ltd.
(2600.HK), commonly known as Chalco, bid to buy Turquoise Hill's
majority stake in SouthGobi for US$920 million last year, but the
offer failed due to political opposition in Mongolia and the
economic slowdown in China.
A SouthGobi representative declined to comment on the possible
sale. Turquoise Hill also declined to comment.
Rio Tinto inherited the Ivanhoe Australia and SouthGobi stakes
last year when it took majority control of Turquoise Hill, which
was operating under the name Ivanhoe Mines Ltd. Turquoise Hill's
most prized asset is the Oyu Tolgoi mine in Mongolia, which holds
some of the world's biggest unexploited copper and gold deposits.
Rio Tinto executives said previously that the company was only
interested in Turquoise Hill for its exposure to Oyu Tolgoi.
Rio Tinto's new CEO, Sam Walsh, who took over in January, has
made offloading assets a key priority. The mining giant has put
stakes in several Australian thermal coal mines up for sale. They
include up to 29% of its Coal & Allied unit and its interests
in the Clermont and Blair Athol thermal coal mines in Queensland
state, The Wall Street Journal reported this month, citing people
familiar with the matter. Those deals could be worth around $3
billion in total. Thermal coal assets have struggled in recent
years due to falling prices for the commodity. A glut of natural
gas in the U.S., stronger environmental regulations and a weaker
global economy have all weighed on its price.
The miner has also appointed Credit Suisse and Canadian Imperial
Bank of Commerce to sell all or part of its 59% stake in Iron Ore
Company of Canada, The Wall Street Journal reported last month.
Rio Tinto hasn't confirmed it is selling the Australian coal
assets, its Canadian iron-ore operations or the Turquoise Hill
stakes. It has long said that it aims to focus on only large,
high-quality assets that it can expand.
Mr. Walsh's predecessor, Tom Albanese, departed early this year
on the back of $14 billion worth of impairments due to poorly timed
acquisitions. The bulk of that writedown, up to around $11 billion,
was related to aluminum assets the company bought in 2007 which
were cause for impairments throughout Mr. Albanese's tenure. An
additional $3 billion of writedowns were attributed to a coal
acquisition in Mozambique made only two years prior.
Deutsche Bank estimates Rio Tinto could raise as much as $10
billion from its asset sale program. Rival BHP Billiton Ltd.
(BHP.AU) is following a similar path, having identified 10 noncore
businesses it could exit in an effort to cut costs. BHP Billiton
announced Chief Executive Marius Kloppers would be stepping down in
May after more than five years at the helm. Mr. Kloppers declined
his bonus last year, largely due to a writedown on U.S. shale
assets acquired only the previous year.
Write to Cynthia Koons at cynthia.koons@wsj.com and David
Winning at david.winning@wsj.com
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