By Gillian Tan
SYDNEY--One of the world's largest private equity firms, Carlyle
Group LP (CG), has made an initial bid for Rio Tinto PLC's (RIO)
majority stake in an Australian copper-gold mine, a person familiar
with the matter said.
The move underscores growing interest among private equity in
resources, as valuations of assets like active mines tumble in line
with metals prices, and major mining companies look to conserve
cash rather than pursue deals. KKR & Co. LP (KKR) had earlier
shown an interest in Rio's Northparkes mine in New South Wales
state, but didn't follow up with an indicative offer ahead of this
week's deadline for bids, another person said.
Rio Tinto is looking to sell assets like Northparkes as part of
a broader strategy to cut costs and focus on increasing returns to
shareholders. The London-based company, which makes most of its
profits from producing iron ore in Australia's Pilbara region and
selling it to Asian consumers, has also put stakes in some
Australian coal mines and its Canadian iron ore operations up for
sale, people familiar with the matter say.
Analysts at Commonwealth Bank of Australia said in March that
Rio Tinto had the potential to realize US$13.5 billion from asset
sales, and selling its 80% stake in Northparkes could raise as much
as US$1 billion.
A spokesman for Rio Tinto declined to comment. Units of Japan's
Sumitomo Group own the remaining 20% interest in the Northparkes
mine.
The Carlyle Group has been increasing its bets natural resources
globally, but has so far focused its interest on energy assets and
power generation. In partnership with Riverstone Holdings, it has
raised a combined US$5.8 billion across four funds for investment
in energy, power and associated infrastructure.
It has also sought to build expertise. In December, it acquired
a stake in Texas-based energy investor NGP Capital Management and
two months earlier acquired a stake in a New York-based commodities
investment manager.
Rio Tinto acquired Northparkes as part of the 3.5 billion
Australian dollar (US$3.6 billion) acquisition of North Ltd. in
2000, outbidding Anglo American PLC. The mine exports most of the
copper concentrate it produces to customers in Japan, China and
India. According to Rio Tinto, extensions to the mine since it
began production in 1994 have extended its expected life to
2024.
Buyout firms such as The Carlyle Group and KKR have
traditionally shied away from investing in mines directly as they
lack the expertise to handle mining operations that are often
technically challenging and exposed to volatility in metals prices.
Lenders are also cautious about providing private-equity firms with
large amounts of debt for resources deals, given that their record
of success is less proven than in other sectors.
-Write to Gillian Tan at gillian.tan@wsj.com
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