Rio’s $3.7bn Mozambique coal business fetches $50m
Rio Tinto (LON:RIO) announced Wednesday a deal with an Indian investment company to sell its Mozambique coal venture for $50 million.
The assets were acquired by Rio Tinto as part of its acquisition of Riversdale Mining in 2011 for $3.7 billion and comprises the Benga coal mine and other projects in the Tete province of the Southern African nation.
Rio Tinto acquired its Mozambique project in 2011, after buying Australia's Riversdale Mining for $3.7 billion, but last year took an asset impairment charge of $3 billion on the coking coal venture citing challenges in building the necessary infrastructure to bring the project on stream.
Rio Tinto said it expects to complete the sale to International Coal Ventures, owned by India’s state run coal and power firms, during the third quarter.
During the first half of this year the Mozambique mines produced 246,000 tonnes of coking coal and 230,000 tonnes of thermal coal.
While Anglo American (NYSE:AAL) last year also walked away from its Revuboe project in the country, Vale (NYSE:VALE) has made Portuguese-speaking Mozambique its biggest destination for investments after Brazil.
Vale plans to spend just over $2 billion through 2015 to construct a second open pit at Moatize in Tete to up annual production to 11 million tonnes. The company also aims to finish its more than $4.4 billion transport corridor to the Nacala port by the end of this year.
According to data supplied by The SteelIndex spot Australian hard coking coal (FOB Australian east coast exports) traded at $95.10 a tonne on Wednesday, not far off record lows for the specification.
Only around 25%–30% of the seaborne metallurgical coal trade is sold on a spot basis, but its importance is growing rapidly driven in part by China's increasing dominance as an importer.
Quarterly benchmark coking coal traded as high as $330 a tonne in mid-2011 after bad weather took much of Australia's supply off the market and stayed above $200 for two years between September 2010 and September 2012, before slumping to $120 this year.
Image courtesy of Rio Tinto Coal Mozambique