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MELBOURNE–Rio Tinto PLC (RIO) agreed to sell its majority stake in an Australian copper-and-gold mine to China Molybdenum Co. (3993.HK) for US$820 million, the U.K. company’s latest step to reduce debt amid shaky demand for commodities.
The world’s second-biggest mining company by sales said it had reached a binding agreement to sell its 80% stake in the Northparkes mine to the Chinese company, which produces molybdenum and tungsten, ingredients used in steelmaking. Sumitomo Corp. (8053.TO) units that hold the remaining 20% of the mine have the right to match the offer, and the deal is subject to Australian regulatory approval. A spokeswoman for Japan’s Sumitomo declined to comment on the company’s intentions.
Rio Tinto acquired Northparkes in 2000 after a hard-fought battle with Anglo American PLC (AAL.LN) to acquire the mine’s operator, North Ltd., for 3.5 billion Australian dollars (US$3.2 billion).
China Molybdenum, which is in a trading halt, hasn’t said why it is seeking to buy Northparkes, from which copper concentrate is mainly sold to Japan, China and India. Two shareholders that together own 69% of the Chinese company have given binding support to the deal, Rio said Monday.
Rio Tinto is slashing costs and spending to cut debt that swelled to almost US$19 billion last year, and to protect its single-A credit rating. Like rival mining companies, including BHP Billiton Ltd. (BHP) and Glencore Xstrata PLC (GLEN.LN), it is seeking to sell smaller or struggling assets as prices of commodities such as copper and coal remain weak, due largely to slower growth in China’s economy.
Analysts at Macquarie Group said the Northparkes deal would allow it to focus on more core operations like iron-ore mines in the resource-rich state of Western Australia, and a new copper-and-gold deposit in Mongolia. Northparkes, in New South Wales state, became operational in 1994 and produced about 43,100 metric tons of mined copper for Rio Tinto last year.
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