The sale of the Kestrel mine makes Rio now the only major global company with no coal assets

This article is more than 2 years old

This article is more than 2 years old

Rio Tinto has sold its remaining coalmine in Australia for $US2.25bn, making good on a pledge to exit the fuel.

As the Australian resources minister, Matt Canavan, launched a taskforce to boost the coal industry, the deal leaves Rio as the only major global mining company to have no coal assets, the Royal Bank of Canada said.

The sale of Rio’s stake in the Kestral mine to the private equity manager EMR Capital and Indonesia’s Adaro Energy Tbk was made at a significant premium to analysts’ expectations and was Rio’s third coal deal this month.

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In total, the assets have raised $4.15bn. Rio has said it would use the funds for “general corporate purposes”, which could include higher returns for shareholders.

Jean-Sebastien Jacques, the chief executive, said the latest sale, combined with Glencore’s purchase of the Hail Creek mine and the divestment of undeveloped coal projects, would make Rio’s portfolio stronger and more focused.

RBC said the lack of coal assets could make Rio more attractive to investors as capital moves away from fossil fuels.

The divestments would boost Rio’s balance sheet by $3.9bn, RBC said, “providing the potential for more buybacks or cash returns”.

Tuesday’s deal to sell Rio’s 80% stake in the underground coalmine in Queensland is subject to regulatory approvals and should be completed in the second half of 2018.

The Kestrel mine in the Bowen basin region, which produces high quality coking coal, will be jointly managed and operated by EMR and Adaro and marks EMR’s biggest mining investment. Last year it bought an 80% stake in the Zambian copper mine Lubambe for $97.10m.

It will also be Adaro’s biggest overseas investment.

“Coking coal ... offers excellent demand and supply fundamentals for decades into the future,” EMR’s chief executive, Jason Chang, said on Wednesday.



Rio Tinto shares rallied in London trading but were down 0.4% in Australia on Wednesday in a broader market down around 0.6%.