Mining giant Rio Tinto (ASX, LON:RIO) has finally inked a binding deal to sale its 50.1% stake in Australia’s Clermont thermal coal mine to GS Coal Pty, a company jointly owned by Glencore Xstrata (LON:GLEN) and Sumitomo Corporation.
The firms will each own 25.05%, with Glencore operating the asset and marketing the production.
The transaction, valued at US$1.015 billion, had been one of the hardest for Rio to complete this year, as prices for the kind of coal produced at the central Queensland-based mine slumped in September to levels below $80 a tonne for the first time since October 2009.
With this Rio gets closer to finalize its $5 billion cost cutting program costs kicked off early this year, which focused on getting rid of non-core operations, such as some coal stakes in Australia and Mozambique and an iron ore operation in Canada.
So far the firm has announced or completed almost $3 billion of divestments, but its larger planned asset sales — including its stake in Canada’s largest iron ore producer, Iron Ore Company of Canada (IOC)— have struggled. In June, it decided to scrap the sale of its diamond division and in August it gave up on the idea of selling its Pacific Aluminium (PacAl) subsidiary.
Clermont mine was one of Rio’s largest thermal coal mines, which began operations in 2010 to supply up to 177 million tonnes over its expected 17-year lifetime.
The deal allows the partners to maintain stable coal supplies to the Japanese market as well as the rest of Asia as the region’s economy grows, Sumitomo said in the statement.
Glencore Xstrata, the world’s No. 1 exporter of power-station coal, has interests in roughly 35 coal mines in Australia, Africa and Colombia, accounting for close to 10% of global seaborne supplies.