Rio to Generate $US741 Million

Submitted by Jim Thesiger on 23 November, 2009 - 04:01

The Australian mining giant Rio Tinto (RIO) will raise at least $US741 million by floating the company’s US coal assets on the New York Stock Exchange and also by the associated bond sales along with binding offers since the early periods of the last year. However, the company expected that the sale of associated debts and the float of most of the coal operations to generate more than what it originally got. The sale of 30.6 million shares generated $US459 million through IPO with the range of offers staying within $US16 to $US18 per share. The miner is expecting to get as much as $US434 million from the share sale with underwriters still being able to buy additional 4.6 million shares to cover any over-allotments.

The chief financial officer of the company Guy Elliott termed the raising as a success although Rio was unable to reach its targeted price in the IPO. The IPO route was the best choice to divesting the assets something which was proven by the successful pricing of the debt offering of Cloud Peak Energy and its IPO which was completely subscribed, Mr. Guy added. Rio will own 48 percent stake of Cloud Peak. However, the stake might be lowered through secondary offering. The company claimed that it has managed to reach its target of $US10 billion in agreed asset sales since February last year, as it is attempting to pay down around $US40 billion of debt.

The amount includes $US2 billion binding offer for Alcan Packaging assets. However, the miner was unable to come up with a clarification about the reason why calculations went up to $US10.3 billion from $US9 billion two weeks ago, where only $US741 million was raised through Cloud Peak. In addition, a growing number of market analysts have dismissed the speculation of BHP renewing its $135 billion bid for Rio Tinto, an attempt that failed in the past.