Less than two years ago, London-based mining and minerals giant Rio Tinto
At least for now, Rio Tinto's fortunes have reversed themselves. The company needs to raise funds to repay the first installment -- nearly $9 billion -- of its Alcan bank debt, and its board is squabbling over the best way to round up the needed cash. More than a few shareholders are also disconsolate over the spurning of what ultimately could have been a lucrative offer from BHP. And today, depressed commodity prices have dragged Rio's share price down 80% from its 52-week high.
Beyond that, Rio's chairman-designate, Jim Leng, kicked off this week by tendering his resignation after just a month in his position. It seems that much of the board -- including CEO Tom Albanese -- favors raising funds through a sale of convertible debt (and minority interests in some properties) to Aluminum Corp. of China
Leng strongly preferred to opt for a rights offering. Issuing new shares, he argued, was less risky than selling assets, given the current economic climate. Rio may struggle to fetch realistic values for the properties.
However, there may be other money-raising options for Rio Tinto. The company appears to be discussing the sale of as-yet undisclosed assets to Japan's commodity trading house Mitsui, which also happens to be a part-owner of a Rio Tinto iron ore mine in Australia. Beyond that, Rio is also reportedly in talks with Australian packing company Amcor (OTC BB: AMCRY) regarding the sale of a Rio Tinto packaging unit.
Should investors view Rio Tinto as a long-term opportunity? Despite shares' year-over-year tumble, I wouldn't invest heavily in them at this point. But once the global economy improves, the world's largest mining companies, including BHP Billiton, Brazil's Vale
For related Foolishness: