Oil in the era of Trump… what could it mean?
Trump is back, and the threat of tariffs looms large over China’s economy.
Rio Tinto’s (NYSE:RIO) Canadian iron ore project is still looking for a new owner and today three potential buyers were scratched off that list.
Private equity firms Apollo and Blackstone and miner Glencore are out of the bidding process after putting in offers “well below the mining group’s a targets,” Reuters reports.
The firm has been very “ambitious on price” – estimating the value of the sale about about $3.5 to $4 billion – according to an industry adviser interviewed by Reuters.
By selling its 59% stake in the Iron Ore Company of Canada (IOC), Rio will be able to focus on its Australian iron ore projects. Lately the miner has been pumping cash into the Australian mines as it works on increasing production by 21% this year. Iron-ore accounts for four-fifths of Rio’s earnings.
In June, state-owned metals giant China Minmetals Corp announced that it was considering buying the shares; Reuters reports that one of the remaining bidders, in addition to Canada’s Teck, “could be a consortium of Chinese buyers.”
Earlier this year, the world’s third largest integrated miner began a “blowout sale” of its assets as it attempts to tackle its $19 billion debt.
Most recently, Rio announced the sale of its Australian NorthParkes copper mine to China Molybdenum for $820 million. In 2012, a Chinese firm also bought the miner’s shares in the South African Palabora Mining company.
Rio may also be close to offloading one of its three diamond mines: Rumours swirled in July that Toronto’s Harry Winston Diamond (NYSE:HWD) was in “advanced talks” to buy Rio’s 60% stake in the Canadian Diavik Mine.
4 Comments
John VanPlantinga
While they are selling, Rio may as well set themselves up to get a higher sale price than they are asking now by massively reducing unit costs.
For example, with hard magnetite rock, we can reduce OpEx by 51%, CapEx by 37%, Energy by 42% and Staffing by 29%. We can do this with most other mineralizations as well
These returns would make higher asset prices than those currently asked a bargain.
Even if Rio does not get to fully implement our plan, they could sell our plan with the project and get a much better price, as the plan will be a clear path to much higher yields for the buyer.
Or… they could set up a new Blackstone funded company and sell these assets into it.
Another is to co-venture with their select debt holders using our plan to massively increase yield and pay off the debt and then some with convertibles or options.
Many ways to solve the problem without loosing volume or control of the businesses they paid so dearly to built up during the boom. It is pointless to buy business that can be made to be very very profitable and then sell them off at low market prices.
If anything, to pay down its debt, Rio needs much higher production yields as well as asset sales. Further they have to have a solid plan in place to pay off the debt at much lower ore prices, just in case. If they want better yields, we are better at it than anyone.
See our brand new web site for a description: http://www.nemc.info.
We can conceive the right solutions for the project, no matter what type of mineralization. Once approved by your board, we can bid build and operate it and will even take a stake in its success.
North Eastern Mining Consultants
[email protected]
609-610-3700
rock dude
Ask cliffs natural resources management . What happened to a 4.9 billion dollar iron ore mine needing written downs ? They bought something over priced and should of done their homework on cost verses profit margins ?
Apple
This could also be scaring possible purchasers
Two Quebec Innu communities have filed a $900-million lawsuit against the Iron Ore Co. of Canada, claiming the miner has violated its rights for nearly 60 years.
The Innu First Nations of Uashat Mak Mani-Utenam (Uashaunnuat) and Matimekush-Lac John (MLJ) said the IOC, which is majority-owned by Rio Tinto, caused harm by operating a large mining complex and railway on traditional territory (Nitassinan) in northeastern Quebec and Labrador since the 1950s without their prior consent.
SAFEantivirusAndroid
railway, sept illes included?