Rio Tinto `confident' it can sell key assets

SYDNEY–Global miner Rio Tinto Ltd. said yesterday it was confident it could sell assets worth billions of dollars to pay down massive debt, despite concerns about a lack of buyers, a day after rival BHP Billiton Ltd. dropped a bid for the firm. BHP's shock decision Tuesday to pull its $66 billion (U.S.) bid sent Rio's shares plunging by almost 40 per cent, amid concerns Rio would struggle to sell assets and cut its $39 billion in net debt during a severe global economic downturn. Analysts questioned Rio Tinto's confidence it could sell assets in the next few months. "That's by no means certain," said FW Holst analyst Rob Craigie. "There may be additional assets they would consider selling. But the environment over the next six to 12 months is not going to be a good environment for selling assets." BHP Billiton cited Rio's debt position in scrapping its hostile bid, as well as sliding metals prices, the threat of global recession and demands from European competition regulators to sell off some iron ore and coal assets. But Rio chair Paul Skinner said the group was comfortable with its financial position, remained committed to raising its dividend and dismissed market speculation Rio would need to raise equity. He said yesterday it would make asset sales in the next few months. "We now move on. We have a very strong company," Skinner told reporters. "We are confident with our financial position. We have other ways of managing our debt." Credit rating agency Fitch downgraded Rio by one notch to BBB+ with a negative outlook and removed the company from `rating watch positive' yesterday, citing concerns about its elevated debt levels in a climate of sharply falling commodity prices. Assets on the block include a major packaging business, aluminum products, its U.S. coal business, an Australian copper mine and its U.S. Sweetwater uranium mine. Rio Tinto shares dropped 34 per cent in the first day of trading in Australia after BHP abandoned the bid and fund managers said Rio's slide partly reflected uncertainty over how it would reach its target for asset sales. But Evy Hambro, manager of the $4.7 billion BlackRock World Mining Fund, which owns both BHP and Rio shares, said in an interview there were early signs that sliding metals prices could bottom soon. Aluminum Corp of China (Chinalco), which in February bought a stake in Rio in a move seen as an attempt to win leverage over the bid, said it planned to raise its 12 per cent stake to at least 14.99 per cent. But Shanghai-based metal analyst Heng Kun said it was unlikely Chinalco would buy any Rio assets, saying the Chinese company was not in a position to buy as its profits were falling at home. Source: The star.com