The international miner Rio Tinto Limited (ASX:RIO) announced that it reached a binding agreement for the sale of its Mount Pleasant thermal coal plant to MACH Energy Australia for US$244 and anticipates to receive royalties.
The sale of Mount Pleasant plant aligns with the company’s ongoing strategy to liquidate its underperforming assets. The strategy was initiated in January 2013 and the company has now completed the divestment in US$4.7 billion worth assets.
Rio has also recently announced that it entered into a binding agreement for the sale of its interest in Bengalla coal Joint Venture, which amounts to US$830 million.
Rio Tinto’s Copper and Coal chief executive Jean-Sebastien Jacques commented on the recent agreements: “These agreements for over US$800 million in asset sales deliver significant value for our shareholders, with the potential for future royalties from Mount Pleasant. We believe Mount Pleasant can have a very positive future under its new owners with different priorities for development and capital allocation.”
The company also mentioned that Mount Pleasant is a large-scale, thermal coal asset which is located in the Hunter Valley of NSW with total marketable reserves of 474 million tonnes.
Having completed substantial divestments in its coal operations, the company retains its 60% share in Coal & Allied operations and Mount Thorley Warkworth, which are also located in the Hunter Valley. These assets generated 5.2 million tonnes of semi-soft coking coal and 19.5 million tonnes of thermal coal in 2015 through multi-steam, multi-pit and open-cut mining operations.
While RIO slumped considerably in 2008, the stock moved in an uptrend until 2011 and travelled side-ways until the end of 2014. Subsequently, the stock has been moving in a downward direction since the beginning of 2015, mainly due to the ongoing rout in commodity prices. RIO closed at $39.16 on Monday, and has lost 12.4% since the beginning of the year.
Author: Imran Valibhoy
Jan 27, 2016
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.