Rio Tinto Asset Sale To Include Copper-Gold

Rio Tinto’s planned asset sales are likely to include copper-gold operations, industrial minerals, specialty chemicals and possibly uranium, fetching as much as $14.5 billion, analysts said. In the statement accompanying the $38.1 billion all-cash takeover bid for Alcan last week, Rio said the company’s increased overall size would provide the opportunity for a strategic review of all assets looking to maximize value. “In our opinion, Rio is not seeing a full market value for its gold, uranium and industrial minerals assets within the current valuation multiple,” said UBS, predicting revenue of at least $14.5 billion from asset sales, which would bring down Rio’s debt levels. Rio’s net debt has risen to 64% of total capital in light of the Alcan takeover bid. “This plus operating cash flow should bring gearing down to close to 30% by end-08, in our opinion,” UBS said. A divestiture of Rio’s 80% stake in the Northparkes copper-gold mine in Australia appears likely, analysts said, with Australian diversified miner Oxiana expressing interest in copper and gold assets today. Northparkes has a production capacity of 60,000 metric tons of copper and 50,000 troy ounces of gold.The mine’s life could be extended to 2017, Rio says on its Web site. “I don’t believe Rio would consider its stake in Escondida as a non-core asset, or give up its equity in Freeport’s Grasberg mine in Indonesia,” ABN Amro analyst Warren Edney said. Rio Tinto’s Kennecott Utah Copper operation in the U.S. was also an unlikely candidate for divestment. A sale would likely take place during the first half of 2008, said a Melbourne-based analyst who declined to be named. “Rio won’t complete on Alcan until the end of 2007, after which they’ll probably do the asset review fairly quickly,” the analyst said. Total revenues from asset sales, excluding parts of Alcan’s downstream operations, could amount to $4-$7 billion, the analyst said.