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Rio Tinto sells Australian coal mine for a dollar

Published 04/07/2016, 06:25 pm
Updated 04/07/2016, 06:30 pm
© Reuters.  Rio Tinto sells Australian coal mine for a dollar
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By Harry Pearl

SYDNEY, July 4 (Reuters) - A small Australian miner on Monday bought Rio Tinto's RIO.AX Blair Athol coal mine in Queensland state for a token A$1, swooping in as big miners offload unprofitable assets after years of low coal prices.

TerraCom Ltd TER.AX , a subsidiary of Orion Mining Pty Ltd, said it will also receive A$80 million ($60.10 million) from the mining giant to meet rehabilitation costs at the site.

Cameron McRae, TerraCom's chairman, said the mine represented a good opportunity despite weak thermal coal prices.

"We believe that we can make a good return at the current coal prices," McRae said by telephone. "Any upside, is obviously good for us."

Coal from Australia's Newcastle GCLNWCPFBMc1 port was trading at around $52.85 per tonne last week, up from a low of under $50 earlier in June.

The Blair Athol coal mine, which was closed in late 2012, is one of the oldest in Queensland and the second in the Bowen Basin to be sold for A$1 in the past year.

In July 2015, Stanmore Coal SMR.AX paid Vale VALE5.SA and Sumitomo Corp 8053.T A$1 for the Issac Plains coking coal mine, which is about 100 kilometres (62 miles) from the Blair Athol mine.

McRae, who worked at Rio Tinto (LON:RIO) for 28 years, said the Blair Athol Mine had a 30-year history of selling a high energy, low-in-cost coal to Asia.

"Thermal coal is still going to be a large part of the energy mix in the future," he said.

TerraCom plans to start more than 50 hectares (124 acres)of site rehabilitation while bringing the mine back into production.

The company estimated more than 100 people would be employed once work started and said it hoped to be producing 2 million tones per year by the end of 2016.

David Lennox, a resource analyst at Fat Prophets, said the rock-bottom sale price would be an advantage to TerraCom given the condition of the thermal coal market.

"The fact they outlaid such a small capital amount will be beneficial, but they have to get their operating prices down." ($1 = 1.3312 Australian dollars)

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