Rio Tinto Group’s sale of Australian coal assets has drawn interest from New Hope Corp., potentially pitting it against Glencore Plc and former Xstrata Ltd. head Mick Davis, people familiar with the matter said.
New Hope, the Australian coal producer, is interested in some of Rio’s mines in the country’s New South Wales state, said the people, who asked not to be identified as the information is private. Possible bids from Glencore and Davis’s private-equity firm X2 Resources for all the assets may value Rio’s controlling stakes in the three mines at $3 billion to $4 billion, the people said.
While the suitors have contacted Rio individually in recent weeks to express their interest, the Anglo-Australian miner hasn’t made a final decision on whether to proceed with a sale and may decide to keep the mines, they said.
New Hope, based in Queensland, said in March it’s seeking to use some of its A$1.1 billion ($817 million) of cash for acquisitions. A sale would help Rio exit less-profitable assets and allow CEO Sam Walsh to focus on iron ore and copper.
The world’s largest mining companies are confronting a China-led slowdown in commodities demand that’s crimping prices and hurting profits and shares. Australia’s Newcastle coal, an Asian benchmark, fell to a more than seven-year low earlier this year and is down about 14 percent in the past 12 months.
Rio is willing to sell assets including its Australian coal mines if the price is right, Chief Financial Officer Chris Lynch said at a Aug. 10 roundtable with analysts, according to a UBS Group AG research note. Representatives for Rio, Glencore, New Hope and X2 Resources declined to comment.
Glencore CEO Ivan Glasenberg explored a potential deal with Rio for the Australian mines, including forming a joint venture, about a year ago, people with knowledge of the matter said previously.
For Davis, who founded private-equity firm X2 Resources after leaving Xstrata, a deal would be the first after raising billions of dollars from investors for mining acquisitions. People familiar with the matter said in June that X2 was in talks to buy the three Australian mines.