Rio Tinto sells US mine for $761 million

09 March 2009

Mining giant Rio Tinto has agreed to sell its Jacobs Ranch coal mine in the US to Arch Coal, Inc. for $761 million, keeping in line with its plan of increasing asset sales as part of an aggressive cost cutting campaign and reduce its mountain of debt.

Rio said in a statement that the rest of its Rio Tinto Energy America coal unit is still for sale. The London-based company, the world's third-largest miner, is selling assets, cutting 14,000 jobs and last month agreed to $19.5 billion of investment from Aluminum Corp of China as it seeks to reduce its $38.9 billion debt.

Arch Coal Inc, the second-biggest US coal producer, supplies power companies from 11 mining complexes in Wyoming, Utah, Colorado, West Virginia, Kentucky and Virginia, said it will make cost savings by combining Jacob Ranch with its Black Thunder mine.

The mine in Wyoming's Powder River Basin region shipped 42.1 million tons of coal used at power stations in 2008, St Louis-based Arch said in a statement on Monday. Jacobs Ranch had about 381 million tons of proven and provable reserves as on 31 December.

Arch said on 30 January that it planned to slow production growth until the economy rebounds. The company expects to sell between 120 million and 127 million tons of its coal in 2009, down from 137.8 million tons in 2008, it said at the time.

Arch said it was paying for the facility with a combination of cash flow from operations, borrowings under the company's $800 million revolving credit facility and possibly other debt instruments.