Rio Tinto stock came back fighting on Friday after the mining giant announced it will sell its Mount Pleasant thermal coal assets to Mach Energy Australia. The deal will be worth US$220.7 million plus royalties and takes Rio’s divestment tally to $4.7 billion over the last 3 years.
Rio had a bumpy start to the week after the company reported a 47% profit drop for the first half of the year, its weakest earnings in the past decade. Sluggish iron ore and copper prices weighed heavily on the company’s bottom line, in addition to currency headwinds and derivative losses. The Anglo Australian miner also slashed its interim dividend to $0.45 a share, down from last year’s $1.08 a share payout. CEO Jean-Sébastien Jacques did little to boost optimism in the market, announcing that he expected the commodity sector to remain challenging for the next few years. A drop in demand from the company’s largest consumer, China, has spurred an aggressive cost cutting regime.
The company said in its earnings statement on Wednesday that; “the global economy seems stuck in a subdued low-productivity growth pattern which would indicate that continued caution is required for the second half of 2016.” It added that; “growth in China has stabilized, but it is on a long transition path of slower and less commodity-intensive growth.”
The Mount Pleasant mine is located in New South Wales and has estimated reserves of 474 million tonnes of thermal coal. Mach Energy expects to complete its first delivery of coal from the site at the end of 2017 and has been approved to generate 10.5 million tonnes of coal for export per year. Singapore based Mach Energy is a subsidiary of Indonesia’s biggest conglomerate, the Salim Group.