Business

Rio Tinto offloads Northparkes stake to Chinese firm

A train loaded with iron ore travels towards the Rio Tinto Parker Point iron ore in western Australia
Image caption A drop in commodity prices has hurt profits at mining firms

Rio Tinto has agreed a deal to sell its 80% stake in Northparkes copper and gold mine in Australia to China Molybednum for $820m (£530m).

Rio has been looking to sell assets as part of its $5bn cost-cutting plan.

Meanwhile, Chinese firms have been keen to buy resources assets as they look to cater to domestic demand.

China is the world's largest buyer of copper and analysts said that demand from the world's second-largest economy was likely to continue to grow.

"China's economy will continue to expand at a good pace, despite the recent slowdown," said Michael McCrathy, chief market strategist at CMC markets.

"That will see demand for commodities continue to rise and as a result these assets make very good investment for Chinese firms looking to ensure long term supplies."

Not big enough

Rio Tinto announced the cost-cutting plan in November last year as slowing global demand and a fall in commodity prices hurt profits at mining firms.

In June, the firm sold a nickel and copper mine in the US for $325m.

Chris Lynch, chief executive of the firm, said the sale of the Northparkes stake "demonstrates our continued focus and discipline in the way we allocate capital across the group".

"Northparkes is a successful business but is not of sufficient size to be a good fit with our strategy," he added.

The sale is subject to regulatory and shareholder approval and to Rio's joint venture partners in the mine, Sumitomo Metal Mining and Sumitomo Corporation Mineral Resources, waiving their right to, or failing to match, the offer.

If approved by regulators and shareholders, the deal is expected to be complete by the end of the year.

More on this story