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Melbourne. – Rio Tinto Group (RIO), the world’s second-biggest mining company, drew a line under one of its most disastrous deals by offloading its Mozambique coal assets for $50 million. The London-based company bought the assets as part of the A$3,9 billion ($3,7 billion) purchase of Riversdale Mining Ltd. in 2011, writing them down by $3 billion last year.

The charge, part of $14 billion in writedowns on assets including the $38 billion purchase of Alcan Inc in 2007, also led to the departure of former chief executive officer Tom Albanese.

“It’s a reminder of what happened during that period when things went awry and is very embarrassing,” said Mark Taylor, a Sydney-based analyst with Morningstar Inc. “It represents a lost opportunity under the leadership of Tom Albanese, though it’s small biscuits compared to what was effectively burned under the Alcan acquisition.”

International Coal Ventures Pvt Ltd, a group of Indian state-run metal and mining companies, will buy the assets, the London-based producer said today in a statement.

Rio slipped 0,7 percent to 3,450 pence at 8:29 am in London, trimming its gain for the year to 1,1 percent.
The Mozambique coal deal, which includes projects in the country’s Tete province, is subject to regulatory approvals and is expected to close in the current quarter, the company said in its statement. Other operations in the country will be unaffected, Rio said.

Rio’s Turquoise Hill Resources Ltd unit also agreed to sell a 29,95 percent stake in Mongolian coal producer SouthGobi Resources Ltd for C$25,5 million ($23,5 million).

National United Resources Holdings Ltd will pay 45,5 Canadian cents a share, a 31 percent discount to SouthGobi’s last traded price in Toronto yesterday, according to a statement yesterday.

That deal comes almost two years after Aluminum Corp of China Ltd, China’s biggest producer, dropped a bid to buy 60 percent of SouthGobi for C$925 million.

Turquoise Hill will maintain a 26 percent stake in SouthGobi after the deal, the buyer said in its statement.
The deal for Rio’s Mozambique coal unit is the first acquisition for ICVL, formed in 2009 with investments from steelmakers Steel Authority of India Ltd and Rashtriya Ispat Nigam Ltd, iron ore producer NMDC Ltd, Coal India Ltd and power generator NTPC Ltd (NTPC) to buy coking coal mines overseas.

Staff at the Benga mine in Mozambique, which started commercial production in the third quarter of 2012, have focused on cutting operating costs and increasing productivity, according to filings.

Rio cited transportation constraints and a cut to recoverable coking coal estimates in its writedown of the asset. ICVL Chairman CS Verma and chief executive officer Ajay Mathur didn’t respond to two calls each on their mobile phones.

“The best description is that it’s a black eye for Rio,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd, which oversees about A$1,3 billion ($1,2 billion), said by phone. “A lot of investors were questioning the transaction when it occurred and their worst fears have been realized.”

Platypus holds shares in BHP Billiton Ltd and doesn’t have holdings in Rio Tinto, Williams said. – Bloomberg.