* Rio taps Deutsche Bank to help sell coal mines-WSJ
* Says target is up to 29 pct of its Australian Coal&Allied
* Sales process comes as new CEO makes good on vow to cut
SYDNEY, April 3 Rio Tinto has hired
Deutsche Bank to help sell Australian coal assets worth billions
of dollars, the Wall Street Journal said on Wednesday, as the
company seeks to slash costs and exit non-core and
The move comes less than three months after the
Anglo-Australian mining goliath's new chief executive, Sam
Walsh, vowed to pursue an "unrelenting focus on pursuing greater
value for shareholders" via aggressive cost reductions and
divestment of non-core businesses.
Slower industrial growth in China that has put pressure on
commodities prices and cut profits for mining companies has led
to a major re-think by Rio Tinto's board over how the company's
money is spent.
Last year nearly 90 percent of earnings came from iron ore
and much of the rest from copper mining in Chile and the United
States. It wrote down aluminium assets and coal mining in
Mozambique by $14 billion.
A basket of other commodities, from uranium and salt to
aluminium and titanium, contribute little if anything to the
Rio Tinto is targeting $5 billion in cost cuts by the end of
2014, two-thirds of that from its energy units, which include
coal and uranium, and from aluminium. Each has been hit by low
prices and soaring costs, particularly in Australia.
In Coal and Allied, Rio Tinto is seeking to sell up
to 29 percent of its stake, the WSJ reported, citing unnamed
people familiar with the matter.
"There's been some speculation that they will try and exit
thermal coal, it just doesn't make sense for them. They make all
their money out of iron ore and thermal coal just doesn't fit
the model," said a coal industry executive who asked not to be
"The problem is, in this climate, who's the buyer," he said.
Rio Tinto has made no secret of its desire to down size its
aluminium division after buying Alcan in 2007 for $38 billion.
Its Pacific Aluminium unit was established to bundle 13
underperforming aluminium assets for closure, sale or spin off
into a separate entity for an in-specie distribution to Rio
"If Rio could divest everything except for its iron ore
operations in Australia and Canada, and its flagship copper
assets at Escondida and Kennecott, it would generate a higher
profit, and at a substantially higher return," Commonwealth Bank
of Australia said in a research report.
Rio Tinto owns 80 percent of Coal & Allied, and wants to cut
its holding to as low as 51 percent, according to the WSJ.
The miner is also seeking a buyer for its controlling stakes
in the Clermont and neighbouring Blair Athol mines in Queensland
state for more than $1 billion, the WSJ said in a separate
report. The Blair Athol mine was closed by Rio Tinto in
Rio Tinto and Deutsche Bank declined to comment
on the reports.
Rio Tinto and Japan's Mitsubishi Corp bought Coal
& Allied Industries in late 2011 in a deal valuing it at A$10.6
Clermont holds 177 million tonnes of thermal coal, with a
maximum capacity of up to 12.2 million tonnes a year, and has an
expected life of 17 years, according to Rio Tinto.
Australian benchmark thermal coal prices are currently
hovering below $90 a tonne, down from an all-time high of above
$174/tonne in 2008 and near the cost of production for many
Australian coal mines.