Rio Tinto overhaul plans dented as diamond sale scrapped
By Sonali Paul
MELBOURNE (Reuters) - Rio Tinto Ltd (RIO.AX: Quote) has scrapped the proposed sale of its $1.3 billion diamonds business, a setback for its plan to sell a swag of mines and company stakes to tighten operations during a global industry downturn.
The world no.3 miner has at least half a dozen assets on the block, aiming to pare $19 billion in net debt, cut costs and boost returns to shareholders, but buyers are unwilling to pay up in face of volatile commodity prices and rising debt costs.
"In resource land it's just a little bit tough at the moment," said Paul Xiradis, chief executive of Ausbil Dexia, which owns Rio Tinto shares.
"The market would have preferred for Rio to sell (diamonds)....But if you're not going to achieve the right price, there's no point in cutting off your nose to spite your face just to achieve an end."
Rio is not alone in struggling to sell assets. Barrick Gold (ABX.TO: Quote) was unable to pin down a sale of a stake in African Barrick Gold ABGL.L to state-owned China National Gold in January, and Peabody Energy (BTU.N: Quote) and Brazil's Vale (VALE5.SA: Quote) have given up trying to sell some mines in Australia.
Rio Tinto's new chief executive, Sam Walsh, this month hosed down expectations for a sale of the diamonds unit, amid speculation the company was going to float the business after failing to find a buyer.
"This is not market day at the bazaar. I'd be quite happy to keep it," Walsh was quoted saying in an interview with The Telegraph in London.
Rio's Diamonds and Minerals chief executive Alan Davies said there was a positive market outlook for diamonds. Continued...