Three bidders out as Rio faces lackluster Canadian sale: sources – by Anjuli Davies and Clara Ferreira-Marques (Reuters U.S. – August 6, 2013)

LONDON – (Reuters) – Three big-name bidders for Rio Tinto’s (RIO.L) majority stake in Canada’s largest iron ore producer are now out of the running, sources familiar with the talks said on Tuesday, after offers came in well below the mining group’s targets.

The sources said private equity firm Apollo, which had been working with Canadian pension fund CPPIB, rival Blackstone (BX.N) and commodity trader and miner Glencore (GLEN.L) were no longer in the race after a second round of bids last month. The low offers, at a time when dozens of mining assets are for sale and demand for steelmaking commodities is uncertain, raise questions over the future of a sale that could still take months to tie up – should Rio decide to push ahead.

Rio has a handful of assets on the block as it battles to cut a $19 billion debt burden and meet cost cutting targets. Like other miners seeking to divest unwanted activities, however, it has found buyers unwilling to pay up and in June was forced to scrap the sale of its $1.3 billion diamond business, 15 months after it was first announced.

Rio appointed banks to sell its 59 percent stake in Iron Ore Company of Canada (IOC) earlier this year after deciding to focus its iron ore efforts on assets in Australia’s Pilbara region, where the world’s second-largest iron ore producer has lower costs and higher grades.

But the Canadian sale process has been complex, slow and – so far – disappointing, the sources said.

“They were very ambitious on price,” said one industry adviser. “And you couldn’t pick a worse time to sell.”

Rio surprised investors late last month with the sale of its majority stake in Australia’s Northparkes copper mine for $820 million to China Molybdenum (3993.HK) – an unexpected buyer at a price in line with what Rio was said to be seeking, despite a process which did not attract a raft of firm bids.

Yet bankers and analysts questioned on Tuesday whether Rio could do it again with iron ore and not sought-after copper.

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