London, England — MININGREVIEW.COM — 28 January 2009 – The Rio Tinto Group – the world’s third- largest mining company – may sell selected shares to help cut its overall debt by US$10 billion (R100 billion), after having failed to meet its asset-sale targets.
In a statement issued here Rio Tinto said that the company did not rule out the potential to issue equity as one of the options it has available. No decision had been made yet, it added.
Bloomberg News reports that companies are selling stock to bolster capital and cut borrowings as a worldwide credit squeeze crimps access to debt. Rio is aiming to raise as much as US$4 billion (R40 billion), after the global recession derailed its plan to sell some mines and plants to repay debt, “The Australian” newspaper reports.
“The likelihood of Rio doing a share sale is increasing,” said Peter Arden, an analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. “Buyers want super bargains and Rio does not want to sell at those prices. Rio is probably thinking it’s better to go to the market.”
Rio – which has US$38.9 billion (R390 billion) of debt – is slashing spending by US$5 billion (R50 billion), putting assets up for sale and eliminating 14 000 jobs worldwide as demand for its products slows. It may need to sell joint-venture assets or consider selling as much as US$5 billion (R50 billion) of shares to reduce debt.