Rio Tinto sells Aus. coal mine for $606 million

Rio Tinto has agreed to sell its 40% interest in the Bengalla open cut thermal coal mine in eastern Australia to Queensland-based coal producer New Hope Corporation for A$865 million ($606 million), the companies said in separate statements Wednesday.

Rio Tinto still has interests in two mines in the region, Hunter Valley Operations and Mount Thorley Warkworth. It produced 8.6 million tonnes in 2014.

Under the agreement, Rio Tinto will assume 100 per cent ownership of Coal & Allied, while Mitsubishi Development will move from holding a 20 per cent stake in Coal & Allied to holding a direct 32.4 per cent stake in the Hunter Valley Operations mine.

Australia-listed New Hope said Bengalla was competitively positioned on the global export thermal coal cost curve and had a 25-year lifespan at current production levels, underpinned by 218 million mt of marketable coal reserves.

It follows a recent agreement between Rio Tinto and Mitsubishi Development to simplify the ownership structure of Coal & Allied.

The sale is expected to be completed in the first quarter of 2016.

New Hope Coal chief executive Shane Stephan told Fairfax Media last week that New Hope was prepared to pay for quality assets: “I think one should be very cautious with the term “bargain”. Rio Tinto will ensure high safety and environmental standards are maintained through the transition to the new owners”.

Rio’s partners in Bengalla, including Wesfarmers, which has 40 per cent, have a pre-emptive right on the deal but they are unlikely to exercise it.

The sale comes amid a downturn in coal, which has seen its price more than halve to less than $60 per tonne over the past four years, and reinforced speculation that Rio wants to exit the commodity.

Rio Tinto, advised by Deutsche Bank, has put all its coal stakes in the Australian state of New South Wales up for sale.