Oct. 4 (Bloomberg) -- Teck Resources Ltd., Canada’s second-largest mining company, is losing interest in buying Rio Tinto Plc’s controlling stake in Iron Ore Co. of Canada after failing to agree on a price, according to two people familiar with the situation.
While Teck is still officially participating in the auction process for the asset, the Canadian company and London-based Rio are far apart on a valuation and aren’t moving closer, said the people, who asked not to be identified because the negotiations are private.
In light of the rising price of iron ore, which has climbed as much as 29 percent since the end of May as Chinese steel demand recovers, Rio may opt to keep its interest in Iron Ore Co., the people said. Rio’s 59 percent stake in the unit may be valued at as much as $3.5 billion, Credit Suisse Group AG analysts said in June.
Chris Stannell, a Teck spokesman, said the company doesn’t comment on market rumor or speculation. Natalie Rouleau, an Iron Ore Co. spokeswoman, didn’t respond to phone calls seeking comment. Bruce Tobin, a Rio spokesman, declined to comment.
Rio and other large mining companies such as BHP Billiton Ltd. and Anglo American Plc are looking to sell some of their less-promising assets as the sluggish global economy slows demand growth for iron ore, copper and other commodities.
Rio Chief Executive Officer Sam Walsh said Aug. 8 that a planned sale of Australian and New Zealand aluminum businesses “for value is not possible in the current environment.” In June, Rio said it backed away from selling its diamond business after failing to find a buyer and deciding not to pursue an initial public offering of the unit.
The company began a sale of its Iron Ore Co. stake this year as part of efforts to curb costs and strengthen its balance sheet, hiring Credit Suisse Group AG and Canadian Imperial Bank of Commerce to sell all or part of its interest, a person close to the matter said March 1.
Iron Ore Co. initially attracted interest from several potential buyers. Buyout firm Apollo Global Management LLC made an offer, a person familiar with the situation said in June, and Glencore Xstrata Plc was studying a bid, two people familiar with the matter said the same month. Canada Pension Plan Investment Board and Montreal-based Caisse de Depot et Placement du Quebec, another pension fund, were seeking partners for possible separate bids and Blackstone Group LP also expressed interest, the Wall Street Journal reported July 5.
Blackstone, Apollo and Glencore dropped out of the sale process after offers came in below Rio’s expectations, Reuters reported in August. China’s Wuhan Iron & Steel Co. is bidding, the Wall Street Journal reported in September.
Iron Ore Co.’s operations are located in Labrador City, 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 via a 420-kilometer (261-mile) railway and port on the Gulf of St. Lawrence.
The unit has sufficient reserves to last 30 years at current production rates and sales were about C$1.8 billion in 2012, according to Labrador Iron Ore Royalty Corp., which owns 15 percent of the producer. Mitsubishi Corp. has a 26 percent stake.
Barrick Gold Corp. is Canada’s biggest miner by sales.