Rio Tinto completes its exit from coal with sale of Queensland mine

Mining giant Rio Tinto has struck a deal to sell its last coal mine — its third asset sale in just over a week.

Rio’s stake in the Kestrel underground coal mine in central Queensland will be sold to a consortium which includes private equity manager EMR Capital and Indonesian company Adaro Energy for $2.9 billion.

It follows last week’s sale of the Hail Creek coal mine and two coal development projects in Queensland, and takes the total funds raised from the recent divestments to $US4.15 billion ($5.39 billion).

Rio Tinto chief executive J-S Jacques said the sales leave the miner’s portfolio “stronger and more focused”.

Last year, Rio sold its coal business in New South Wales’ Hunter Valley to China-backed miner Yancoal for $US2.69 billion ($3.49 billion).

The long-anticipated coal exit leaves Rio Tinto focused on iron ore, aluminium, copper and bauxite.

UBS analysts said the miner was “now leaner and greener” following the sale of the last coal mine.

The divestments could also open the door for some investors who avoid companies that own coal to take another look at Rio Tinto.

“It’s an interesting development for Rio, now being one of the only major mining companies in Australia that has no exposure to coal,” Simon O’Connor, chief executive of the Responsible Investment Association Australasia, said.

“It shifts Rio into a position where some of those investors who may have restrictions around coal will now be in a position to consider investing in Rio Tinto again,” he told the ABC.

“Certainly within our membership, there’ll be a lot of investors assessing the implications of this for Rio and their own portfolios, and they’ll be monitoring that divestment process over a number of months.”

Analysts tip cash to be returned to shareholders

Rio Tinto said the funds from the recently announced sales would be used for “general corporate purposes”.

In a note UBS analysts said they expected the proceeds of the sale to be returned to shareholders through share buybacks.

RBC Capital Markets analyst Paul Hissey agreed the additional funds increase the potential for additional return to shareholders, but said the miner might also consider other options.

“With the balance sheet in a very strong position, it might not be long before the strategic focus shifts from asset divestments to acquisitions,” he said.

Source: ABC NEWS