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MELBOURNE Oct 3 Rio Tinto has agreed
to give away the Blair Athol coal mine in Australia to Linc
Energy, which plans to reopen the mine to expand its
coal unit ahead of a spin-off, the two companies said on
Rio Tinto and its partners closed the mine last November as
its resource had nearly run out after 30 years of operations and
it was losing money amid a coal price slump.
Linc Energy, with lower overheads than a giant like Rio
Tinto, was betting it could run a small mine more cheaply, an
"This is a shrewd move by Linc and may provide some
financial benefit as, given the size, it's highly likely they
can operate Blair Athol at a much lower cost than Rio could,"
UBS analyst Glyn Lawcock said.
The benefit to Rio is that Linc will be picking up part of
the bill for rehabilitation costs and any environmental
obligations at the site. Linc and Rio declined to disclose those
Linc's New Emerald Coal division plans to produce 3 million
tonnes a year of thermal coal, used in power stations, which
would boost the business revenue ahead of a planned spin-off.
Rio and its Blair Athol partners - Leichardt Coal, Japan's
Electric Power Development Co Ltd (J-Power) and Japan
Coal Development Co Ltd - have agreed to contribute to the
rehabilitation costs from 2016 to 2019.
Shares in Linc, which plans to shift its listing to
Singapore from Australia in the hopes of attracting new
investors, rose 2.2 percent to A$1.285, outpacing a 0.5 percent
rise in the broader market.
Rio is still trying to sell the nearby Clermont coal mine
and a minority stake in its Coal & Allied business in Australia,
together valued at around $3.2 billion, but analysts and bankers
have said they would tough to sell with thermal coal prices
holding near four-year lows.
"I think it's going to be a bit harder to find a buyer (for
those) because you're talking serious money," Lawcock said.
Rival BHP Billiton failed to find a buyer for its
Gregory Crinum mining complex in Australia, which was thought to
be worth about $400 million.
(Reporting by Sonali Paul; Editing by Tom Hogue)