Rio Tinto sells interest stake to New Hope Corporation

In October 2013, company Rio Tinto consented to sell a 50% stake in Clermont coal mine for $1.02 billion to a joint endeavor in the middle of Glencore and Japan’s Sumitomo Corp.

Rio Tinto has reached a binding agreement for the sale of its 40 per cent interest in the Bengalla coal Joint Venture in Australia to New Hope Corporation Limited for US$606 million1. The Clermont mine is a larger mine, producing 12.15 million tons of thermal coal in 2014 compared with Bengalla’s 8.6 million-ton output.

Coal assets from North America to Australia have been available to be purchased by the world’s greatest miners, which are seeking to shield benefits from strongly lower commodity prices. “It could also be a signal that asset sales in the depressed coal sector are finally beginning to happen”.

Environmentalists have questioned the track record of the company that has bought Rio Tinto’s stake in the Bengalla mine near Muswellbrook.

Presently, stresses over the wellbeing of China’s economy are being aggravated by more extensive worries around future interest for warm coal, which is utilized to generate power, as the US what’s more, different nations act to check contamination. “We are waiting for the right time and right price”.

Analysts at Macquarie and Morgan Stanley said Rio had fetched a strong price for the Bengalla stake relative to their valuations of its coal assets. “It demonstrates our commitment to further strengthening our balance sheet, maintaining a disciplined approach to allocating capital across the Group and delivering strong returns for shareholders through the cycle”.

Analysts worry that Rio Tinto and BHP will find it harder to increase payouts to investors as weak commodity markets take a bite out of earnings.

Recently, Mitsubishi Development signed an agreement for Rio Tinto to assume 100% ownership of Coal & Allied.

The buyer, New Hope, is capitalised at AU$1.37 billion and was scouting for acquisitions after it reported a 25 percent rise in the annual profit.

Bengalla is the smallest of three coal mines in the Hunter Valley in which Rio Tinto holds an interest.

Mitsubishi declined to comment on whether it plans to sell the stakes it now has in the Hunter Valley Operations and Warkworth mines, but a spokesman said it sees energy coal demand growing in the medium to long term.