By Ross Kelly
SYDNEY--Rio Tinto PLC (RIO.AU) is poised to sell its Blair Athol
coal mine in eastern Australia to Linc Energy Ltd. (LNC.AU), in a
move to scale back exposure to a commodity that has suffered a
steep fall in prices, a person familiar with the matter said
Wednesday.
Discussions between the parties are at an advanced stage and a
deal for the mothballed mine in Queensland state could be announced
as soon as Thursday, the person said. Financial terms aren't
known.
International resources companies like Rio and BHP Billiton Ltd.
(BHP.AU) are selling smaller or less-profitable assets to boost
shareholder returns following the end of a decadelong mining boom
in Australia. Rio Tinto in July agreed to sell its majority stake
in an Australian copper-and-gold mine to China Molybdenum Co. for
US$820 million and wants to sell several other assets, including an
iron-ore mine in Canada and stakes in coal mines in Australia and
Mozambique, to trim debt that swelled to almost US$19 billion last
year.
Rio Tinto closed the Blair Athol operation in November after it
decided not to extend its mining life. The company estimated there
was at least 10 million metric tons of coal left at the mine, which
operated for nearly three decades. Annual production peaked at 11.3
million tons in 2009, falling to 2.6 million tons in 2012 as Rio
scaled down operations.
"Any value obtained in our view would be good for Rio because we
consider it a closed asset," said Glyn Lawcock, a Sydney-based
mining analyst at UBS. "Someone else might have a slightly
different vision on what they want to do with the mine and what
direction coal prices are headed."
Later Wednesday, Linc requested that trading in its shares be
halted ahead of an agreement to acquire a coal asset in Queensland.
It didn't identify the mine.
Securing a sale is a boost for Rio Tinto, which faced the cost
of converting the mine back to grassland. Another person familiar
with the sales process said the Blair Athol mine could be restarted
quickly, possibly within two months.
Coal assets are proving particularly difficult to sell as
China's economy cools and coal supply in the Asia-Pacific region
rises as cargoes are redirected from North America where power
plants are using more natural gas. At round US$78 per metric tonne,
prices for thermal coal used in power generation exported from
Australia are less than half their July 2008 peak.
Three separate bids for Rio's majority stake in the Clermont
mine, which borders Blair Athol, all fell short of the company's
expectations and talks with potential buyers have stalled, people
familiar with the matter told The Wall Street Journal on
Monday.
Brisbane-based Linc already owns undeveloped coal properties in
Queensland, but wants to focus more on its unconventional fuel and
U.S. conventional oil assets. The company has indicated previously
that it would consider buying extra coal assets and packaging them
together to make a possible spin off of its coal business more
appealing to investors.
Linc has also considered acquiring the Gregory Crinum mine in
Queensland, which produces metallurgical coal used in steelmaking,
from BHP Billiton Ltd. (BHP.AU) and Mitsubishi Corp. (8058.TO).
Late July, BHP said it had decided against selling the
operation.
Linc said early Wednesday that it's planning to switch share
market listings to Singapore from Australia and issue new shares in
the process to help fund its growth. The company intends to seek
approval from its shareholders for the move at a meeting on Nov.
6.
-Write to Ross Kelly at ross.kelly@wsj.com
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