Rio confirms plan to sell Riversdale’s ZAC

[miningmx.com] — RIO Tinto is looking to sell Riversdale’s single South African asset, the Zululand Anthracite Colliery (ZAC), once it has completed the takeover of the junior coal firm.

Speaking to Miningmx on Monday, Riversdale managing director Steve Mallyon said Rio has decided ZAC would not fit the group’s core business, because of its size relative to any other Rio Tinto operation as well as the fact that Rio does not otherwise trade in anthracite.

Rio previously hinted it might let go of some Riverdale assets if its bid were successful.

“Rio Tinto’s review of those assets and businesses will also consider the merits of, and opportunities for, divestiture,’ Rio said in its bidder’s statement issued in January.

Rio clinched the takeover of Riverdale in April, when it raised its holding to 73% following a $3.9bn bid at A$16.50 per share. It gained full control last week when India’s Tata Steel agreed to sell its 26% stake. Riversdale would now be delisted from the Australian Stock Exchange.

Riversdale bought ZAC from BHP Billiton subsidiary Ingwe Collieries in 2005. It lifted production at the mine by more than 23% during the period from 2005 to 2008 (from 741,000 tonnes per year to 917,000 t), after which output again slumped to around 2005 levels.

During the quarter to end-March, ZAC produced 191,083 t coal.

“The production over the last quarter was hampered by the temporary closure of the Western Extension shaft as a result of a geological disturbance created by adverse weather conditions,’ read a quarterly report. “Western Extension will be operational during the latter part of the June quarter.’

Mallyon said the asset has a potential 20-year lifespan and has recently restructured its 26% black economic empowerment shareholding.

“Over the years we’ve put in R500m to build a business that was sustainable,’ he said. “It is an excellent asset, we’re getting good prices for its anthracite and (it) now sells 70% of production internally.

“Our plan is to get a competent miner there to realise the progress we made.’

MANAGEMENT INTACT

Mallyon said Riversdale’s management would largely remain unchanged following the completion of the Rio takeover.

“The senior team would stay largely intact,’ he said. “Some will be moving on because they want to work for smaller companies, while we also would have to reconstitute the board again.’

Finding a long-term solution to infrastructure difficulties in Mozambique would be among the first priorities for Rio Tinto following the takeover, Mallyon said.

Riversdale has a 2 million tonnes (mt) per year allocation on the new Sena line which runs to the port city of Beira.

“We have a 13 billion tonnes resource in that country,’ said Mallyon. “You cannot ship that out at 2 mt per year; you need a better solution and that is what Rio is spending time and effort on at the moment.’