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Rio Tinto sells, but Who's Buying?

Rio Tinto sale, but who buys?

Rio Tinto is spinning off some of its stakes to repay $ 40 billion of debt and market speculation is rife that the assets are sold and could buy.

Mining Rio Tinto (RIO.L) is swarming assets to repay $ 40 billion of debt after BHP Billiton withdrew an offer of $ 66 million, but in these troubled times, who's buying?

Bankers and analysts say the world's biggest miner BHP (BHP.AX) (BLT.L) Vale (VALE5.SA) (RIO.N), Switzerland Xstrata Plc (XTA.L) and aluminum giant Chinalco China, parent of Chalco (2600.HK) (601600.SS) are all Rio eyeing diverse collection of assets.

Most have the money to pounce on opportunities in the short term.

"The two with the most money, BHP and Vale, they are certainly review the situation," a banker in Hong Kong resources in a Wall Street firm said Reuters.

"Xstrata is still highly leveraged. His work has taken a hit - that would be interested, but has less capacity make a big deal, "said the banker.

Neil Goodwill, an analyst at Goldman Sachs JBWere, said the principle behind a BHP / Rio deal stressed the strategic advantage of combining the two companies iron ore assets in the Pilbara region in Australia, and Rio should seek to capture those benefits.

"For BHP, operating assets, we believe, would be a must, for Rio, extracting cash for a 50/50 joint venture can facilitate its current debt, "Goodwill wrote in a report.

"We believe this agreement could add significant value for shareholders and solve certain problems Debt Rio pressing. "

Rio (RIO.AX) is logging under the weight of its debt, caused by its 38 billion buy aluminum producer Alcan last year. It has already reduced its forecast for iron ore production estimates for 2008 and 2009 to about 175 million tons and 180 million respectively.

Rio is now AXING 14,000 jobs, cut capex by more than half, and spinning off valuable assets to give investors confidence in its balance sheet as an autonomous entity.

But who will buy what remains uncertain.

We talk persistent on the market that BHP wants Rio stake 30 per cent in the Escondida, the world's largest mine copper, for $ 4 - $ 6 billion - a valuable asset that was one reason for BHP bid for Rio in the first place. BHP already operates the mine.

"Clearly, Rio is a little disordered and sale of the Escondida mine would get a decent price for BHP, "said senior analyst Mark Pervan ANZ products.

And analysts Business minerals Rio produces salt, talc and borates, could yield $ 1 billion.

French industrial minerals, Imerys (IMTP.PA), Canada's Teck Cominco (TCKb.TO) and companies such as First Reserve takeover and Apollo Global Management would be interested, but no agreement emerged. Private Equity players such as Apollo and Bain Capital have also been mentioned as potential suitors for Rio $ 5 billion packaging sector.

Rio could also sell stakes in copper and gold mine, Grasberg in Indonesia, the uranium mines in Australia and Namibia its 75 percent stake in Coal & Allied Industries Ltd (CNA.AX) or the participation of 68 per cent of the uranium miner Energy Resources of Australia Ltd. (ERA.AX).

Analysts say the market volatility means clarity on prices is still missing, but Rio will have to act quickly to shore up its balance sheet.

On Monday, the government of Australia has cut its production estimates for its two employees main export, iron ore and metallurgical coal, 15.5 per cent and 5 per cent respectively, reflecting a sharp contraction in demand from steel manufacturers reeling from the global economic crisis.

CHINA HERE ... YET

Some bankers said that potential bidders, the state of China supported aluminum giant Chinalco may be as aggressive as it seeks to satisfy the hunger of China for natural resources, and gain prestige and global influence.

UBS said Chinalco, which plans to raise its stake in Rio for at least 14.99 percent, might seek a part of Bauxite and Rio Gove alumina refinery in Australia, which could fetch about $ 5 billion.

And this month, told Reuters that the sources of Chinese partner Rio aluminum joint venture, Qingtongxia Aluminum, is set to be supported by state-owned China Power Investment Corp. to form China's second-largest aluminum producer after Chalco.

But China's hunger for the assets of Rio Australia may hit roadblocks in Canberra next year that seeks to protect its resources from foreign ownership.

Australia controls the Chinese fears of too many local assets will lower prices to the benefit of Chinese customers belonging to the State. And China ( cnmining ) faces its own problems, concerns that growth may slow below the rate needed to create jobs.

"This is not a situation of panic selling," Ken West, a resource fund manager at Perennial Growth Management, said of the position of Rio. "It's just that they should be more proactive than they have been. "

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