Rio Tinto has sold its 80 per cent stake in the Northparkes copper mine to China Molybdenum for $US820 million ($AUD892.37 million).
In a statement Rio explained the mine was not big enough to be a good fit with the company going forward.
“Northparkes is a successful business but is not of sufficient size to be a good fit with our strategy,” Rio Tinto chief financial officer Chris Lynch said.
Lynch explained the move to sell the company's last Australian copper mine was made to improve shareholder returns.
“Any decision to sell is driven by our focus on delivering the best value to our shareholders,” he said.
“The sale of Northparkes represents great value for our shareholders and demonstrates our continued focus and discipline in the way we allocate capital across the group.”
Japanese based Sumitomo Metal Mining holds a 20 per cent interest in the New South Wales operation; the sale remains subject to the company waiving or failing to exercise their pre-emption rights under a Joint Venture Agreement.
The transaction is expected to be finalised by the end of 2013, and will see Northparkes move to 100 per cent foreign ownership.
In April Australian Mining reported the mine was on the chopping block, when Rio hired Macquarie Group to find a buyer.
Junior copper-gold miner Sandfire Resources last week revealed it made an opportunistic $400 million bid for the Central West mine.
The sale of the mine is in line with newly appointed CEO Sam Walsh’s regime of cost cutting and turning the company’s focus towards more profitable assets like Rio Tinto’s iron ore operations in Western Australia’s Pilbara region.
The miner is also reportedly looking to sell its stake in several of its Australian coal mines including Clermont, Blair Athol, and Coal & Allied.
But the move to sell off its copper and coal assets has the potential to leave Rio even more exposed to the volatilities of iron ore fluctuations.
The mine last year produced 53,800 metric tons of copper and 72,000 troy ounces of gold in 2012.
Australian Mining recently visited the Northparkes site, speaking to managing director Stef Loader she said at the time that Rio’s recent $3 billion loss, and subsequent radical cost cutting regime will affect everyone at Rio in some way.
“It will affect us all across the board, the context for us is we are a good operation and we’re in a healthy financial state at the moment and we’re also in pretty good times,” she said.
“Internally over the past couple of weeks we’ve been talking about what we need to do to prepare ourselves to be just as successful in five or ten years time.
“Currently we’re looking at another 20 years mine life, our published mine life is 2024 and we’re working pretty hard to get that through to 2032 and beyond.
“We’re in a great state and we’re a well run business.”
Loader said that Northparkes has the resources and the knowhow to determine what needs to be done over the next two to three years to ensure the site receives future investment.
Northparkes employs about 350 local people from the Parkes, Peak Hill and Forbes areas, only bringing in people from further afield when specialised expertise is required.
Northparkes has two ore bodies; E26 was a smaller but higher grade deposit and when completed delivered about $2 billion in value.
The second ore body, E48 is larger but of lower ore grade, it is about 280 metres in diameter and about one kilometre deep.
Currently about 6 million tonnes comes out from the underground mine every year.
Rio Tinto acquired the asset as part of the $3.5 acquisition of North Ltd. in 2000, outbidding Anglo American.
The mine exports most of the copper concentrate it produces to Japan, China and India.