Rio Tinto exits coking coal, seeks new economy metal ventures

Date: Mar 23, 2018

Miner Rio Tinto is selling its last remaining Australian coking coal asset, Kestrel, shifting growth into investments in metals and minerals for batteries and new economy applications.

The company is close to a complete withdrawal from metallurgical coal, after divesting Hail Creek and other coal assets in Queensland and New South Wales over the past year.

Rio Tinto remains the second-largest iron ore miner in the world, as well as leading iron ore supplier to China. Maintaining a foothold in the old emerging economy model of China-led steel infrastructure and real estate demand comes with sky-high margins. It had 68% EBITDA for its Pilbara iron ore business last year.

Coking coal mining is part of the group’s energy and minerals segment, which reported a 36% EBITDA margin. A series of spot pricing peaks for the commodity in the past two years had led to earnings volatility.

In Perth this week, the contrast with new industry focus on industrial metals was clear.

Perth, capital of Western Australia and head of Rio Tinto’s regional iron ore operations, held its 21st annual global iron ore and steel forecast conference, while Rio Tinto chose to deliver a presentation at the inaugural Lithium & Battery Metals Conference organized at the same hotel.

Rio Tinto is incubating future mining ideas despite strong prevailing demand for steel raw materials, copper and aluminum.

Chinese environmental policy measures are increasing demand for higher grade iron ore and reducing new aluminium capacity, while global growth is driving demand for existing group commodities, said Andrew Latham, head of Rio Tinto Ventures at the Perth event.

“At the same time, we see the potential for a broader suite of metals to play an increasingly important role as new and disruptive technologies change the way we live,” he said in prepared remarks for the event.

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