Rio Tinto said to seek bank pitches on US$1.5b coal sale

[MELBOURNE] Rio Tinto Group has asked banks to pitch for a role advising on the divestment of its last remaining coal operations in Australia, people with knowledge of the matter said.

The London-based company has decided to pursue a sale of its Hail Creek and Kestrel mines after receiving unsolicited approaches from potential buyers, according to the people, who asked not to be identified because the details are private. The assets in Queensland state's Bowen Basin, which mainly produce coking coal used in steelmaking, could fetch as much A$2 billion (S$2.18 billion), people familiar with the matter said earlier this month.

Rio, the world's second-biggest miner, has been divesting coal assets since dismantling its energy division in 2015 and last month agreed to sell US$2.45 billion of Australian mines to a company controlled by China's Yanzhou Coal Mining Co.

The producer is focusing on key divisions including iron ore, which generated more than 60 per cent of profit last year, as well as copper and aluminum, according to Chief Executive Officer Jean-Sebastien Jacques.

There's no certainty the deliberations will lead to a transaction, and Rio could still decide to keep Hail Creek and Kestrel, the people said. A spokesman for Rio declined to comment.

Mine sales appear to be accelerating under Jacques, who took the helm in July, amid a drive to reshape the producer's portfolio, UBS Group AG analysts including Glyn Lawcock wrote in a Feb 13 research note. Rio has announced US$7.7 billion of assets sales since 2013, according to a filing last month.

While Rio likes coking coal as a commodity, the producer no longer has a meaningful position in the material, Chief financial officer Chris Lynch was cited by UBS as telling analysts Monday in Sydney. The futures of other assets - including Iron Ore Co of Canada, a uranium unit and Australian alumina and aluminum operations - are also the subject of debate, UBS cited Lynch as saying.

BLOOMBERG