Rio to sell majority stake in Canada's largest iron ore producer
Giant miner Rio Tinto (LON, ASX, NYSE:RIO), the world’s second-biggest producer of iron ore, is going ahead with its plans of getting rid-off non-core operations to curb costs and bolster its balance sheet, by putting its majority stake in Canada’s main iron ore producer for sale.
According to Reuters, the company has already appointed investment banks Credit Suisse and CIBC to lead the sale of most of it shares in Iron Ore Company of Canada (IOC).
Currently the miner owns 59% of the Canadian producer and the operation is estimated to fetch about $1.7 billion.
Chief Executive Officer Sam Walsh said last month he’d continue assets disposals, as the company had already earned $12 billion from divesting more than 20 projects.
The recent slump on iron ore prices has added extra pressure to Rio Tinto, which relies on iron ore for four-fifths of its earnings, and has been investing heavily to expand mines in Canada and Australia to supply China and other markets.
Walsh, former head of the Rio’s iron ore division, replaced Tom Albanese on Jan. 17, after the company wrote down the value of its aluminum and Mozambique coal assets. The move led to $14.4 billion in writedowns and left the firm in the red.
In its full-year accounts published February, Rio Tinto valued IOC's operating assets at $1.7 billion at the end of last year, but would probably expect a premium on any sale. The Canadian producer contributed $230 million to net profit in 2012, compared with $9.2 billion for its iron ore division as a whole.
(Image by Canadu)