Rio draws up shortlist for Canada iron ore sale: sources

Mon Jun 3, 2013 11:53am EDT
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By Jackie Range and Anjuli Davies

SYDNEY/LONDON (Reuters) - Mining group Rio Tinto Plc (RIO.L: Quote) has drawn up a shortlist of half a dozen suitors for its majority stake in Canada's largest iron ore producer, sources with knowledge of the situation said on Monday.

Rio values Iron Ore Co of Canada (IOC) at around $8 billion and is seeking between $3.5 billion and $4 billion for its stake, one of the sources said - roughly double industry estimates when the asset was earmarked for sale earlier this year.

Like some rivals, Rio has promised to focus on its key assets and sell non-core operations as it wrestles with a $19 billion debt burden, sluggish demand and weaker prices.

But a dearth of serious suitors and poor offer prices have restricted disposals - factors which could still hamper the sale of Rio's 59 percent holding in IOC, even with suitors circling.

"The biggest issue is whether Rio is going to get its reserve price," the source said.

Rio appointed advisers three months ago to sell the stake, adding to a string of assets on the block, including diamonds and aluminum. In iron ore, its push to refocus has meant concentrating on Australia's Pilbara region, where it has lower costs and higher grades.

The two sources said that after receiving 13 to 15 initial bids last month, the shortlist had been whittled down to five or six. One of the sources said it was unclear when binding bids were due, as Rio was still seeking additional interest in coming weeks from buyers including some of China's largest players, so far absent.

While iron ore assets up for sale are plentiful at a time of escalating costs and uncertain economic prospects, most are early-stage projects with high infrastructure costs and associated risks. IOC, however, has been producing since 1954.   Continued...

A Rio Tinto logo is displayed on the front of a wall panel during a news conference in Sydney November 29, 2012. REUTERS/Tim Wimborne