RIO TINTO LIMITED (ASX: RIO)

Rio Tinto is selling its entire 80% interest in the Kestrel underground coal mine in Qld, Australia (RIO’s last coal asset), for $2.25bn, and has inked a binding agreement with a consortium that includes private equity manager EMR Capital (EMR) and PT Adaro Energy (Adaro), an Indonesian listed coal company, in this regard. The transaction is subject to all regulatory approvals (from the Foreign Investment Review Board and the Queensland government) and other conditions precedent being satisfied, and the completion is expected to occur in the second half of 2018.

The Kestrel mine is located in the Bowen Basin, north-east of Emerald in central Queensland and has a longwall mining for high quality coking and thermal coal products. Quite recently only, Rio Tinto announced that it has entered into a binding agreement with Whitehaven Coal for the sale of its entire 75% interest in the Winchester South coal development project in Qld, Australia, for $200m. This included $150m payable to the Company by Whitehaven on the date of completion and a further unconditional payment of $50m payable 12 months after the date of completion. Then a binding agreement with Glencore has been entered for the sale of RIO’s entire interests in the Hail Creek coal mine and the Valeria coal development project in Qld, Australia, for $1.7bn. The sale included the Company’s 82.0% interest in the Hail Creek operating mine and its 71.2% interest in the Valeria project. Subject to meeting the required conditions, the sale completion is expected in the second half of 2018.

With this, the total amount achieved from the recent divestments of the Qld coal assets will be about $4.15bn, with the funds to be used for general corporate purposes. Moreover, Rio Tinto announced that it will use some of its surplus liquidity to further reduce gross debt, launching a bond purchase and redemption plan for up to $2.25bn equivalent.

Overall, the group is on a decent capital management plan, while the stock price is inching towards high levels (with 25% rise in stock price in last one year and 9% fall in past one month). While the stock still looks “Expensive” at the current price of $73.39, the same can be watched given the exit from coal assets and better balance sheet flexibility.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.