Rio Tinto sells Coal & Allied Industries for $2.69 billion, opens iron ore mine
Staff Writer |
Rio Tinto has completed the sale of its wholly-owned subsidiary Coal & Allied Industries Limited to Yancoal Australia Limited.
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Yancoal takes over management of Rio Tinto’s thermal coal business in the Hunter Valley region of New South Wales.
Rio Tinto will receive total consideration of $2.69 billion for the sale, together with customary adjustments for net debt and net working capital at completion.
The $2.69 billion comprises $2.45 billion in cash paid today and a further $240 million of unconditional guaranteed royalty payments.
The first royalty payment of $10 million was made today and an additional $100 million will be received by the end of this year. A further $90 million is expected before the end of 2018.
Under the terms of the sale, Rio Tinto may also receive an additional royalty linked to the coal price capped at $410 million.
Rio Tinto will use the consideration received for general corporate purposes and the Group’s capital allocation framework will be applied.
With production from all Hunter Valley coal operations transferring to Yancoal from today, the Group’s guidance for thermal coal production in 2017 has been revised to 13-14 million tonnes, from 17-18 million tonnes previously.
The taxable gain on the disposal of these assets is expected to be largely offset by carried forward capital losses in Australia. Therefore the cash tax payable is expected to be relatively low compared to the quantum of the taxable gain.
Rio Tinto today officially opened its Silvergrass iron ore mine in Western Australia.
The US$338 million project is the 16th mine at Rio Tinto’s world-class iron ore operations and will produce low-phosphorous ore crucial to maintaining Rio Tinto’s premium Pilbara Blend product.
The brownfields expansion project will lower mine operating costs as a result of the construction of a nine-kilometre conveyor system that will replace traditional road haulage routes linking Silvergrass to the existing processing plant at Nammuldi.
More than 500 jobs as well as opportunities for indigenous contracting were created during the construction of the mine.
Contracts worth more than $180 million were awarded during the construction phase, including contracts to Western Australian company Decmil and Perth headquartered company RCR Resources. ■
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