Global miner Rio Tinto Ltd/Plc may abandon the long-running sale of its talcs and borates businesses as its controversial tie-up with China eases the pressure to sell assets at lacklustre prices.
Rio put the market-leading industrial minerals businesses, which some value at $1.2 billion, on the block late last year as part of a slew of disposals and other measures to help tackle a near $40 billion debt mountain.
But Rio has since agreed to sell convertible bonds and stakes in key assets to Chinese metal group Chinalco, while weak commodity prices and limited debt finance may have dented buyers' appetites.
That means the sale could go the way of several other big-ticket auctions that have run aground -- as scarce debt and a grim economic outlook cause sometimes unbridgeable price gaps between buyers and sellers.
With $19.5 billion in the bag from Chinalco, if it all goes through, there's less need to accept the first offer that comes along for the assets you're selling, said analyst Nick Hatch at ING in London.
A spokeswoman for Rio Tinto in London declined to comment.
The Chinalco deal still needs to be approved by regulators and restive shareholders.
The value of Rio's talc and borates business has likely slid since last year amid the downturn, Hatch added. If it's anything like what's happened with mineral sands, then things have deteriorated quite quickly.
Sources close to the matter have previously said the units attracted interest from trade rivals in China and the west, as well as from private equity firms such as Bain Capital.
For Rio, a sale would deliver not just cash, but would also free up time to focus on central businesses such as iron ore, where it is the world's second biggest exporter.
Potential buyers had to weigh the businesses' strong market positions with their exposure to difficult end markets such as U.S. housing, where borates are used to treat wood against termites.
Fourth-quarter figures from Rio show borates production fell 27 percent from the previous quarter, while talcs dropped 33 percent.
Rio had received a small number of detailed proposals for the businesses, a source familiar with the matter said, declining to be identified because the process is private.
Rio rejected some as undervaluing the units but was still considering others, the source said, and is likely to decide on whether to proceed with any of these in the next week or two.
Some of this interest is for buying parts rather than the whole talcs and borates operation, the source added.
The borates business, U.S.-based Rio Tinto Borax, is the bigger of the two and supplies nearly half the world's refined borates, minerals used in fibreglass, detergents and ceramics.
Sister company Luzenac produces more than a quarter of the world's talc, which is used in paper, paints, plastics, ceramics, rubber, personal care and roofing.
Liberum Capital analyst Michael Rawlinson said Rio had earmarked more than $20 billion of overall assets for sale, but could afford to halt this and other sales.
If it looks like a low price when it's up on the screen, they won't take it -- they're looking for wow-factor, he said.
A big undrawn credit facility and some successful smaller asset sales gave Rio more room for manoeuvre, he said. They have more options than the market thinks. (Reporting by Quentin Webb and Eric Onstad in London, and Joseph Chaney in Hong Kong; Editing by Jon Loades-Carter)
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