Rio Tinto to sell assets to pay $42-billion debt
15 December 2008
The global recession, which has led to a sharp decline in the demand for minerals, has dug a deep hole in the world's third largest mining company, Rio Tinto, which is looking to sell some of its assets which may not fetch a fair price during the current troubled times in order to reduce its $42-billion debt by $10 billion during the course of next year.
Last week the company, in a major shake up, 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. (See: Major shake up at Rio Tinto to reduce debt)
Alcan chief executive Dick Evans had said that he may have acted in haste when he signed the record-setting deal of the Canadian icon to Rio Tinto for $38.1-billion, which accounts for a significant portion of the $42-billion debtin Rio's balance sheet and now surpasses Rio's own market capitalization.
Although it did not spell out which assets it is likely to put up for sale, analysts believe that most of the fire sale of assets will come from the under performed businesses of Rio Tinto Alcan's aluminium business in North America.
It had previously flagged the sale of Alcan's packaging business, engineered products operations, US coal business, the Northparkes copper-gold mine in NSW and the Sweetwater uranium mill in the US.
Rio has sold its 40-per cent stake in the Cortez gold mine in Nevada for $1.7 billion in February, its 70-per cent stake in Greens Creek base metal mine in Alaska for $750 million and its 70 per cent stake in the Kintyre uranium project for A$346.5 million.