Investors urge Rio and BHP to accept lower prices

Leading investment firm BlackRock has urged Rio Tinto and BHP Billiton to accept lower prices for asset sales if they can't attain the full value on some projects.

BlackRock said the mining giants did not need to realise the full price of assets in order to boost shareholder returns, and welcomed the strategy by both majors to sell non-core assets.

 

In an interview with the Financial Review BlackRock natural resources chief Evy Hambro said simplifying the business should be the overall goal of the sales.

 

“You might end up selling something that is worth $1 for 90 cents but if your shares are trading at only 70 cents on the dollar, then you can use proceeds you are getting at 90 cents on the dollar to buy back your own share,” he said.

 

“If you don't get the last cent don't worry about it because the whole strategy of simplifying the business and taking working capital out, plus being able to use that money to buy your own shares at a bigger discount, is exactly the right thing to do.”

 

The comments are the latest in a rising tide of investor pressure for BHP and Rio, with shareholders urging the companies to rethink a number of major investment decisions on the horizon.

 

Rio has approved a $5.9 billion port and rail expansion in WA to boost iron ore capacity to 360 million tonnes a year, but a decision on the mining part of the plan is still pending.

 

Liberum Capital previously said a move by Rio to delay the investment would boost its 2015 earnings by $3.7 billion.

 

BlackRock is the world's largest mining investor and manages the $10 billion World Mining Fund, and Hambro said earlier this year the fund was “putting as much pressure as possible” on miners to reign in their spending.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.