Boston, MA 06/03/2014 (wallstreetpr) – Rio Tinto plc (ADR) (NYSE:RIO) just added more than $1 billion to its balance sheet in a transaction that saw the mining company sell its stake in a coal mine in Australia. The move mirrors the company’s commitment to monetize some of its assets as it seeks to reduce its exposure to operations with high financial risks.
The mining giant unloaded 50.1 percent stake in Clermont coal mine last week. The stake was sold to GS Coal, a jointly owned business of Glencore and Sumitomo Corporation. The business was transacted for $1.015 billion.
The Clermont thermal coal mine opened in 2010 and is projected to supply about 165 million tons of thermal coal within the next 15 years. The mine was discovered accidentally in 1978 by companies that were exploring for gold.
Following last week’s transaction in which Rio Tinto plc (ADR) (NYSE:RIO) gave up more than 50 percent stake in Clermont, the business will now be managed by Glencore. The negotiations them to the sale stake in Clermont started late last year during which Glencore expressed hope that the acquisition of the asset would improve its earnings.
Forgotten Giant
Rio Tinto plc (ADR) (NYSE:RIO) has had little to show from its aluminum business. However, analysts believe that the company has everything to gain by taking another look at the business with the aim of according it the necessary support.
In a move that appears to be heeding the advice of the analysts, Rio Tinto announced executive shake up in its aluminum division where Alfredo Barrios, a former BP veteran, was last week appointed the chief executive of the aluminum business.
According to analysts at Deutsche Bank, resurfacing of Rio’ aluminum business could add more than 10 percent to the company’s profits by 2016. The analysts believe the business is undervalued, yet it has the potential of offsetting the price challenge in the iron ore market.
Bottom Line
Rio Tinto plc (ADR) (NYSE:RIO) appears to have a mix of assets that if properly optimized could significantly improve its profits and free cash flow position so that shareholders can take bigger rewards home in the form of fat dividends and share buyback.
As for the aluminum business, analysts believe that spinning of the business is another viable option to unlock value in the division.
