Rio Tinto Seeks to Sell Stake in Ivanhoe Australia

http://online.wsj.com/article/SB10001424127887323741004578415483095012710.html?mod=googlenews_wsj By CYNTHIA KOONS And DAVID WINNING Rio Tinto is accelerating a plan to sell billions of dollars in noncore assets, even as a slowdown in commodities could lower prices for the deals. Copper and gold producer Ivanhoe Australia Ltd. is the latest operation to go on the block. Citigroup has been appointed to run the sale of the 57% stake in Ivanhoe Australia, people familiar with the matter said. Ivanhoe Australia is controlled by Rio Tinto's Turquoise Hill Resources Ltd. unit. From Deal Journal The sale would be one of several sought by Rio Tinto's new chief executive. Turquoise Hill also plans to sell its roughly 58% stake in SouthGobi Resources Ltd., a Mongolian coal miner, the people said. That process has been delayed, however. Ivanhoe Australia's market value has dropped to 148.7 million Australian dollars (US$156.8 million) from as much as A$1.5 billion in early 2011, punished by declining commodity prices. Ivanhoe Australia said Thursday in a filing to the Australian Securities Exchange that Turquoise Hill has begun a strategic review of its stake. Ivanhoe Australia's main projects under development are the Mount Elliott and Merlin operations, which contain gold and base metals, including copper. The stake sale could trigger a full takeover of the company. Australian law generally requires that a buyer acquiring 20% of a company must bid for a full takeover. SouthGobi, meanwhile, is sitting on potentially 800 million metric tons of coal resources. The Mongolian government had suspended the company's mining and exploration licenses, citing national-security concerns, but in September told the company its licenses were in order. SouthGobi said operations at its flagship coal mine resumed last month. Aluminum Corp. of China Ltd., commonly known as Chalco, bid to buy Turquoise Hill's majority stake in SouthGobi for US$920 million last year, but the offer failed because of political opposition in Mongolia and the economic slowdown in China. SouthGobi and Turquoise Hill declined to comment. Rio Tinto inherited the Ivanhoe Australia and SouthGobi stakes last year when it took majority control of Turquoise Hill. Its most prized asset is the Oyu Tolgoi mine in Mongolia, which holds some of the world's biggest unexploited copper and gold deposits. Rio Tinto CEO Sam Walsh, who took over in January, has made selling assets a priority. The Anglo-Australian company has put stakes in several Australian thermal-coal mines up for sale in deals that could be valued around US$3 billion. Thermal-coal assets have struggled in recent years as a glut of U.S. natural gas, stronger environmental regulations and a weak global economy have weighed on the commodity's price. Rio Tinto also is looking to sell all or part of its 59% stake in Iron Ore Company of Canada . Mr. Walsh's predecessor, Tom Albanese, departed this year in the wake of US$14 billion in write-downs because of poorly timed acquisitions. Deutsche Bank estimated that Rio Tinto could raise as much as US$10 billion from its asset sales. Rival BHP Billiton is following a similar path, identifying 10 noncore businesses it could exit to cut costs. Write to Cynthia Koons at cynthia.koons@wsj.com and David Winning at david.winning@wsj.com