Rio sells projects in South America

first_imgRio Tinto, a leading international mining group, has signed definitive agreements to sell its undeveloped potash assets, largely comprising the Potasio Rio Colorado (PRC) potash project in Argentina, and its Corumbá iron ore mine in Brazil and the associated river logistics operations in Paraguay to Vale, the Brazilian mining company, for some $1.6 billion. Completion of the Corumbá transaction remains subject to receipt of the relevant regulatory approvals, whilst no approvals are required in order to complete the potash transaction. “This transaction demonstrates the depth and quality of our asset portfolio and our ability to unlock value for shareholders despite tough credit markets and economic conditions”, said Guy Elliott, Chief Financial Officer. “This is a very positive step towards meeting our commitment to reduce debt by $10 billion in 2009.”In December 2008, Rio Tinto announced a detailed package of measures in response to the rapidity and severity of the global economic downturn. One aspect of those measures included expanding the scope of its existing asset divestment program.During 2008, Rio Tinto realised almost $3 billion from asset sales, comprising the Greens Creek mine in Alaska for $750 million, its interest in the Cortez operation in Nevada for $1.695 billion and the Kintyre uranium project in Western Australia for $495 million. In January 2009, it announced the divestment of its interest in the Ningxia aluminium smelter in China for $125 million.The potash transaction, comprising PRC and the Regina exploration asset in Canada, is targeting completion and receipt of the cash proceeds in February. The Corumbá transaction will complete when appropriate consents are received, and completion is expected in the second half of 2009. The sales proceeds are allocated $850 million to the potash assets and $750 million to the Corumbá assets.The earnings of the Corumbá iron ore mine were $6 million for the six months ending 30 June 2008 and $12 million for the year ended 31 December 2007. There were no earnings for the potash assets, which are undeveloped. Evaluation expenditure on the potash projects in the first half of 2008 was $18 million. The gross assets of the Corumbá operations as at 30 June 2008 were $263 million. Gross assets of the PRC assets were $33 million as at 30 June 2008. Rio has said that the proceeds from these divestments will be used for the repayment of debt.last_img read more