INTERNATIONAL - Rio Tinto will sell its 69 percent stake in a Namibian uranium mine to China National Uranium Corp (CNUC) for up to $106.5 million, it said on Monday, as China seeks to bolster supplies and Rio offloads less-profitable assets.
Analysts said that China, which is targeting nuclear power as an alternative to fossil fuels and already owns stakes in Namibian uranium production, was an obvious buyer of the shares in the Rossing mine.
Rossing is the world’s longest-running open pit uranium mine, operating since 1976, and has produced more uranium than any other mine.
The Iranian Foreign Investment Company holds a legacy 15 percent stake that goes back to the original funding of the mine, which could have been a problem for some potential buyers.
An industry source close to the deal, speaking on condition of anonymity, said there had been interest from private equity and from China.
The other shareholders are the Namibian government (3 percent), the Development Corporation of South Africa (10 percent) and individual shareholders (3 percent).
Rio Tinto Chief Executive Jean-Sebastien Jacques said the company would work closely with CNUC “to ensure a smooth transition and ongoing sustainable operation at Rossing”.
No one from CNUC was immediately available for comment, though an executive at China National Nuclear Corp said in October it was looking to secure supply for an expected ramp-up in China’s nuclear power generation.
The sale is also in line with global miner Rio Tinto’s disposal strategy, following on from its exit from thermal coal this year. It is also trying to sell some of its aluminium assets.
Monday’s binding agreement comprises an initial cash payment of $6.5 million, payable at completion, and a contingent payment of up to $100 million following completion.
The contingent payment is linked to uranium spot prices and Rossing’s net income during the next seven years.
The transaction is subject to merger approval from the Namibian Competition Commission, with expected completion in the first half of 2019.
Rio Tinto’s London share price eased 0.3 pecent on Monday, against a 0.5 percent gain for the sector index.
The mining sector as a whole has weakened this year as the recovery of 2016-17 has faltered and doubts have surfaced about Chinese demand in the face of trade tensions with the United States.