Apollo Global Management LLC (APO), the private-equity firm run by billionaire Leon Black, made an offer for Rio Tinto Group’s Canadian iron-ore operations, according to a person familiar with the situation.
Apollo is through to the second round of bidding for Iron Ore Co. of Canada, said the person, who asked not to be identified because the information isn’t public. The sale of the unit may raise $2 billion to $3.5 billion, Credit Suisse Group AG analysts said in a June 12 note.
David Outhwaite, a spokesman for London-based Rio, said the company declined to comment on market rumors and speculation. Charles Zehren, a spokesman for Apollo at public relations firm Rubenstein Associates, declined to comment.
Rio, the world’s second-largest mining company, hired Credit Suisse and Canadian Imperial Bank of Commerce to sell all or part of its 59 percent stake in the Canadian iron-ore producer, a person familiar with the matter said in March.
Apollo is among private-equity firms that have stepped up efforts to invest in mining as some of the industry’s largest companies sell assets amid falling commodity prices. KKR & Co., the buyout firm run by Henry Kravis and George Roberts, is considering a bid for Rio’s stake in an Australian copper and gold mine, two people with knowledge of the matter said in April.
There have been 407 mining industry transactions totaling $22.8 billion announced this year, according to data compiled by Bloomberg. The volume and value of industry deals is on track to be lower in the first half compared with the year-earlier period, when there were 517 bids totaling $72.3 billion, the data show.
Rio is seeking to sell assets as Chief Executive Officer Sam Walsh cuts costs to counter slowing growth in demand for commodities. Rio and Melbourne-based BHP Billiton, its biggest competitor, may sell businesses or stakes in mines for as much as $35 billion, Deutsche Bank AG said in March.
Iron Ore Co.’s operations are located in Labrador City in Newfoundland and Labrador, Canada’s easternmost province. About a quarter of its output is shipped to steel mills in Asia, the Pacific region and the Middle East. It owns a 420-kilometer (261-mile) railway and port on the Gulf of St. Lawrence. The unit’s reserves are sufficient for more than 20 years at current production rates, according to Rio’s website.
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