Mining giant Rio Tinto (LON, ASX, NYSE: RIO) is reportedly mulling a whole or partial sale of its troubled coal division in Mozambique and is in the process of choosing a financial adviser to assist with the transaction.
The potential sale comes while Rio is looking to offload its Canadian iron ore assets, as it cuts capital spending after the promotion of former iron ore division head, Sam Walsh, to chief executive.
Rio Tinto took over of the Mozambique coking-coal project in 2011, after buying Australian Riversdale Mining Ltd. for $3.7 billion.
In January, the company took a $3billion write-down on the assets as developing of infrastructure to support the operations proved to be more challenging than expected.
Mozambique’s coal industry has faced a number of challenges in recent months.
First weather conditions forced the Sena railway, which links the mines in Tete province and the Port of Beira, to close in February, disrupting coal shipments.
In March Anglo American (LON:AAL) announced it would not proceed with the acquisition of a 58.9% interest in the $555 million Revuboe metallurgical coal project in Mozambique's coal-rich Tete province.
And last week’s attacks by former rebels have raised political tensions in Mozambique and threaten to shy away foreign investment, according to FT.com.