SYDNEY--Rio Tinto PLC (>> Rio Tinto Limited) is poised to sell its Blair Athol coal mine in eastern Australia to Linc Energy Ltd. (>> Linc Energy Ltd), 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 Billiton Limited) 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 Billiton Limited) and Mitsubishi Corp. (>> Mitsubishi Corp). 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.
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