Rio Tinto has sold its undeveloped Potasio Rio Colorado (PRC) potash project in Argentina and its Corumbá iron ore mine in Brazil and the associated river logistics operations in Paraguay to Brazilian miner, for $1.6 billion.

Potasio Rio Colorado, Argentina's first potash project, is a tier 1 asset located in the Malargüe department in the province of Mendoza. The project is in the feasibility stage and if fully developed will allow Argentina to become one of the world's major producers of potash, an essential crop nutrient. The life of the mine is projected to last more than 50 years.

The Corumbá mine operations are located in western Brazil, in the state of Mato Grosso do Sul. The iron ore is mined from an open pit, processed on site then barged by Transbarge Navegación (Rio Tinto 100 per cent) along the Paraguay River for onward delivery to South American and European customers. Corumbá currently has an annual capacity of 2 million tonnes.

The sale of its potash project in Argentina, fetched the miner $850 million while the Corumbá iron ore mine in Brazil was sold for $750 million, which will enable the company to reduce its $42 billion debt burden by $1.6 billion.

"This transaction demonstrates the depth and quality of our asset portfolio and our ability to unlock value for shareholders despite tough credit markets and economic conditions," said Guy Elliott, chief financial officer of Rio Tinto.

"This is a very positive step towards meeting our commitment to reduce debt by $10 billion in 2009," he added.

The global miner had said in December that it would increase asset sales as part of an aggressive cost cutting campaign and reduce its debt standing at $42 billion at that time. (See: Rio Tinto to sell assets to pay $42-billion debt)

However, the global economic meltdown has stalled its plans to sell those assets in a planned manner although during the first half of 2008, it sold about $3 billion worth of assets and may now be forced to sell the packaging unit, coal business and the minerals division of Alcan.

During 2008, Rio Tinto realised almost $3 billion from asset sales, comprising the Greens Creek mine in Alaska for $750 million, its stake in the Cortez operation in Nevada for $1.695 billion and the Kintyre uranium project in Western Australia for $495 million.

Also last month, in a major shape up, Rio announced that it would axe more than 14,000 jobs globally, slash $5 billion in spending and increase asset sales as part of an aggressive cost cutting campaign to reduce its debt. (See: Major shake up at Rio Tinto to reduce debt)

In January 2009, the Group announced the divestment of its stake in the Ningxia aluminum smelter in China for $125 million.

Rio main minerals business depends on iron ore, copper and aluminum, of which copper has accounted for large profits in the past three years, has seen its price falling by more than half in the past three months.

It is also the second largest producer of iron-ore behind Vale of Brazil.