Rio nets $4 billion from mine sales
RIO Tinto has pocketed $US4.15 billion in its retreat from the Queensland coal sector after it yesterday announced the sale of its last asset, the Kestrel mine in the Bowen Basin.
The sale of its 80 per cent stake to EMR Capital and Indonesia’s PT Adano was for $US2.25 billion.
Rio Tinto chief executive Jean-Sebastien Jacques said that sales of Kestrel, Hail Creek and the undeveloped coal projects delivered “exceptional value’’ to shareholders and would leave the company’s portfolio stronger and more focused on delivering the highest returns through targeted allocation of capital.
“I would like to thank the many people at Rio Tinto and the communities where we operate, whose hard work and commitment has contributed to the success of the coal business over many years. I wish them continued success under new ownership.”
Analysts AME said it expects the key risk facing Kestrel was the mine’s ability to maintain production rates at sufficient levels to justify the significant capital spent to access the current mining area.
“From 2009 to 2013, Rio Tinto and Mitsui paid around $US2 billion to develop the Kestrel South extension, with production rates suffering in the interim,’’ AME said.
“Combined with a declining market, Kestrel was cash negative from 2013 to 2015. If the record extraction rates achieved in the past two years are not maintained, Kestrel runs the risk of becoming a marginal asset.
“However, with Kestrel South increasing life of mine to over 20 years based on reserves, Kestrel has strong potential to be profitable for whoever acquires it.’’
The Kestrel sale is subject to regulatory approvals from Australia’s Foreign Investment Review Board and the Queensland Government.
Rio Tinto anticipates the estimated tax payable on the sale would be about $500 million, however the quantum of tax payable will depend on the final proceeds (after taking into account working capital adjustments), the tax cost base at completion and the total of capital gains and losses realised by the Rio Tinto Australian tax consolidated group at 31 December 2018.