Rössing sale: Rio expects massive loss

Rio Tinto’s share of Rössing production in 2018 was 3.749 million pounds of uranium, 17% more than 2017.
Jo-Mare Duddy Booysen
Jo-Maré Duddy – Rio Tinto is gearing itself for a loss of millions of US dollars when it sells its entire stake of 68.62% in Rössing Uranium to China National Uranium Corporation Ltd (CNUC) later this year.

Releasing its 2018 annual results yesterday, the global mining giant said cash held by Rössing that will go to CNUC as part of the transaction means the deal is likely to result in a net cash outflow for Rio Tinto.

The price tag of the deal is US$106.5 million, about N$1.5 billion.

“On completion of the sale of Rössing Uranium, it is expected that a loss of approximately US$300 million [more than N$4 billion] will be recognised, including the loss that will be recycled from the currency translation reserve on sale of the business,” Rio Tinto said in its financial statements.

The loss is subject to currency movements up until completion of the sale, which still needs regulatory approval from among other the Namibian Competition Commission (NaCC). Rio Tinto said it expects the transaction to be concluded by the first half of this year.

“We have recognised a pre-tax impairment charge of US$9 million on transfer to assets held for sale to write off the property, plant and equipment purchased during the year,” Rio Tinto said.

Production

Production at Rössing Uranium in 2018 was 813 000 pounds or 17% more than the previous year and totalled 5.465 million pounds of yellow cake.

Rio Tinto’s share of this production was 3.749 million pounds as it currently still owns 68.62% of Rössing. Compared to 2017, this is an increase of 557 million pounds.

Rio Tinto attributed the better production figures to higher mill grades.

Rössing contributed about 55% of Rio Tinto’s total uranium oxide production of around 6.76 million pounds last year. The rest – 3.014 million pounds – came from Energy Resources of Australia.

‘Record cash returns’

Rio Tinto yesterday reported its highest annual underlying earnings since 2014, beating market expectations on robust commodity prices, and announced a bumper dividend on divestments and an upbeat iron ore outlook, accprding to Reuters.

Underlying earnings for the 12 months ended 31 December rose to US$8.81 billion, from US$8.63 billion a year earlier. The figure was significantly higher than a consensus estimate of US$8.47 billion compiled by Vuma Financial.

Rio, flush with cash from recent sale of its Grasberg copper mine in Indonesia and other non-core assets, declared a final dividend of US$1.80 per share and a US$4 billion special dividend of US$2.43 per share.

"We have once again announced record cash returns to shareholders," chief executive Jean-Sebastien Jacques said, pointing to the miner's “value over volume” strategy.

Returns of US$7.2 billion from a series of divestments also erased Rio Tinto's net debt, leaving it with a net cash position of US$255 million.

Commodities

Iron ore prices have surged after last month's deadly collapse of a dam operated by Vale SA in Brazil that forced the world's top iron ore miner to cut production, likely boosting earnings this year for its global rivals.

Rio's Australia-listed shares have risen 21% so far this year, compared with a near 15% jump for its larger, but more diversified, peer BHP Group.

The disaster has considerably raised scrutiny of safety standards throughout the industry, in particular tailings facilities. Rio has some 100 tailings facilties across 32 sites.

Rio, which also mines aluminum and copper, said in last month's fourth-quarter production update that it expects Pilbara iron ore shipments in 2019 to be between 338 and 350 million tonnes. It maintained that guidance in its results statement.

Last week, the world's biggest miner BHP kicked off the reporting season for global majors and reported a drop in first-half 2019 profit citing rising costs. – Additional reporting by Nampa/Reuters

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