Together with announcing a major management reshuffle and division reorganization, Rio Tinto (ASX, LON:RIO) revived Tuesday rumours of an incoming $9 billion BHP-style spinoff.
Soon-to-be Rio’s chief executive, Jean-Sébastien Jacques, overhauled the group business divisions, leaving its least loved units — coal, uranium salt, borates and its Iron Ore Co. of Canada — under a new umbrella branded as the “energy and minerals” business.
The news division seems like a portfolio of unwanted assets that could be ready for a spinoff, said Paul Gait, a London-based analyst at Bernstein.
The new division, global asset management firm Sanford C. Bernstein believes, could soon be spun off, just as BHP did to its manganese, coal, alumina and nickel assets last year, when creating South32 (ASX,LON:S32).
“This seems like a portfolio of unwanted assets that could be ready for a spinoff,” Paul Gait, a London-based analyst at Bernstein, said in a note quoted by Bloomberg. “This division looks a lot like the South32 assets previously in BHP’s portfolio.”
The energy and minerals unit will be headed by London-based Alan Davies, once tipped as one Jacques’s rivals to become chief executive.
It includes Rio’s iron ore operations in Canada, which are much smaller and less profitable than its western Australian mines.
The company resolved not to sell those mines three years ago, just before iron ore prices plummeted.
The rumours come as the world’s second largest miner also said Tuesday it would further cut its gross debt by $3 billion, after accepting the purchase of $1.25bn under its maximum tender offer, which began June 7, and $1.75 billion under its any-and-all offer.
Like most miners, Rio has been implementing a series of cost-cutting measures, which included selling off assets to help cut its debt load.
As of December last year, the group’s net debt sat at $13.7 billion.
Comments
old timer
If Rio is planning to spin out its “least loved units”, the uranium segment needs a parting gift, providing a tier 1 asset to the mix. The only asset that comes to mind is Nexgen Energy and its large, high grade “Arrow” uranium deposit located in the Athabasca Basin of Canada.