RIO TINTO and Anglo American said they plan to sell their stakes in Palabora Mining, the South African copper miner, as it no longer fits their investment criteria.
The two mining giants, which together own a 74.5 per cent stake in the group, said in a statement yesterday that the miner “is no longer of a sufficient scale” and that they had kicked off a sale process.
Rio holds about 58 per cent of Palabora and Anglo owns almost 17 per cent.
Their combined holding is valued at about $720m (£447m) at current market prices.
Palabora’s main asset is a copper mine that produces about 80,000 tonnes of refined copper a year, supplying most of South Africa’s copper requirements and exporting the rest.
The mine is expected to produce until early 2016, but studies are underway to extend operations until 2030. However Rio said future value creation at Palabora will likely come from on-site processing of magnetite, “an activity outside of its strategic focus”.
“Rio Tinto is no longer the natural owner of Palabora due to the limited opportunity to significantly expand copper mining,” said Andrew Harding, chief executive officer of Rio’s copper arm.
“We believe Palabora has a solid future under an owner who can develop the magnetite business alongside the existing copper and vermiculite operations.”
Shares in Rio dropped by five per cent to 3488.5p yesterday, while Anglo American fell by 3.6 per cent to 2368.5p, tracking a wider fall in the FTSE 100.