Another Rio Tinto sale fails
After losing three bidders on its Canadian iron ore company on Wednesday, Rio Tinto's (NYSE:RIO) asset sale took a turn for the worse today as it gave up on the idea of selling its Pacific Aluminium (PacAl) subsidiary.
"The divestment of Pacific Aluminium for value is not possible in the current environment and it will be reintegrated into the Rio Tinto Alcan group," Sam Walsh, the company's CEO said in a statement on Thursday.
PacAl has not been a shining star in Rio's operations. The subsidiary was partially responsible for an $11 impairment charge booked in 2012 and production in the first half of 2013 was 20% lower compared to the year before.
But apparently the miner didn't have high expectations for PacAl anyway.
“The market was aware PacAl wasn’t going to sell,” Walsh told the Financial Times. “I am a realist. Let’s get on with life."
Lately Rio has been on an asset purge, attempting to rid itself of non-core and under-performing investments but offers have come in too far below the asking price.
After a disappointing bidding process in June, the company had a change of heart about selling its $1.3 billion diamond business.
Rio did however successfully offload its Australian NorthParkes copper mine to China Molybdenum in July.
With a $19 billion debt burden and a profit drop of 71% in the first half of 2013, the mining giant hopes to cut more than $5 billion in costs this year – $1.5 billion of which has already been achieved.
Some analysts have said that Rio is asking for too much.
"They were very ambitious on price," one industry adviser told Reuters about the Iron Ore Company of Canada sale. "And you couldn't pick a worse time to sell."
Rio was up 3.33% on the New York exchange on Friday after announcing its half-year results and the PacAl decision. Year-to-date the miner has dropped 23% on the markets.