Battle for Rio uranium prize

A BIDDING war is set to burst forth for Rio Tinto’s Kintyre uranium deposit in Western Australia, with a string of local players and several Canadian buyers already talking to the global miner over acquiring the world-class asset.

businessDaily has been told by two sources come to close quarters to the talks that uranium giants Mega Uranium and Cameco have signalled eager interest in acquiring the Kintyre deposit.

businessDaily has also learned that Rio is close to deciding on whether to sell its diamond operations, comprising its Argyle mine in Western Australia and the Diavik project in Canada.

“A sale of Kintyre is definitely in the pipeline and the company is reviewing its position in the diamonds business,” one of the sources said.

Local players said! to be eyeing the Kintyre deposit include Paladin and Oxiana.

Mega, which last year acquired Australian Securities Exchange-listed uranium explorer Redport, has called in bankers from Goldman Sachs JBWere to notify it on the sale.

Mega and Cameco own exploration permits near Rio’s Kintyre project which is on the edge of the Western Desert in the Pilbara region of WA.

A sale of the Kintyre asset would require support from the traditional owners, the Martu People, who secured native title over the site in a Federal Court chief in 2002.

At a latter uranium talk in Perth, representatives of the Martu said the community was interested in taking equity positions in subtle projects in areas it had native title rights.

The looming sale of Kintyre, which has estimated uranium reserves of 36,000 tonnes, is convenient to be the first in a string of divestments to be undertaken by Rio as it streamlines its global operations following its $43 bil! lion purchase of Alcan.

Rio has already signalled it wi! ll onsel l Alcan’s packaging division which analysts suggest could fetch up to $13 billion.

Despite the potentially negative effect of the rising Australian currency on Rio’s full-year profits, UBS analyst Daniel Brebner has upgraded his profit forecasts for the company.

Mr Brebner increased his estimate on current year earnings by 10 per cent to $11.31 billion and set a new price target of $128 for Rio scrip.

Rio shares fell $2.20 to $109.10.

“We expect the impulse of the US slowdown will have relatively low impact on the mining industry as commodity markets are largely driven by Asian economic factors,” Mr Brebner told clients. “The bulk commodities, particularly iron ore and coal, are well insulated from the US.”

The bullish outlook on bulk commodities has also prompted Mr Brebner to raise his 2008 earnings forecast for BHP Billiton by 6 per cent.

He has also raised the share price target for BHP to $52.!

UBS also expects local iron ore producers will be successful in winning peculiar payments for the extra cost of freight from Asian iron ore customers.

news.com.au

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