Rio Tinto completes Alcan Cable sale
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Nicholas Grove is a Morningstar journalist.
Rio Tinto (RIO) has completed the sale of the North American portion of its Alcan Cable business to the US-based General Cable Corporation for US$151 million in cash.
The sale of the North American business - which represents approximately 85 to 90 per cent of overall revenues of Alcan Cable - as well as an Alcan Cable operation in Tianjin, China, was agreed on 21 May 2012, the mining giant said on Wednesday.
The US$34-million sale of the Tianjin operation is expected to close later in the year, Rio said in a statement.
Also in the resources sector on Wednesday, Fortescue Metals (FMG) said it has sold its power station at its Solomon iron ore mine in Western Australia's Pilbara region to Canada's TransAlta Corporation for US$300 million.
The iron ore miner said it also entered a long-term agreement with TransAlta for 100 per cent of the power station's capacity over the current life of the Solomon mine.
"It was always our intention to divest the Solomon power station to an established owner and operator of power generation assets," Fortescue chief executive Nev Power said.
The sale follows Tuesday's announcement by Fortescue that it was lowering its fiscal 2013 production guidance as a result of volatile market conditions and lower iron ore prices.
It also lowered capital expenditure guidance and said it was cutting staff and operating costs in an effort to save approximately US$300 million.
When it comes to having a "moat" in iron ore mining, being a low-cost producer is the key and Fortescue is not a low-cost producer, Morningstar senior resources analyst Mathew Hodge said in a recent note.
"Fortescue's hope is that the iron ore price will rebound strongly and sustainably in the next three to four months so as not to incur additional costs for demobilisation and remobilisation of contractors," Hodge said.
"That's possible, but in our view, a risk."