Rio Tinto and Anglo American are planning to sell their respective stakes in the Palabora Mining Co. Palabora Mining is the largest copper producing company in South Africa.
Both companies said that the decision to sell their shares in Palabora is so that they can focus on larger and longer life assets, a number of companies have been seen selling smaller assets in South Africa given the increasing business costs and the political risks of operating in the country.
Rio Tinto owns 57.7% stake in Palabora Mining while Anglo American holds another 16.8%. The company has a market capitalization of 6.743 billion rand which is roughly equal to $945.4 million. The mine in its current condition can remain operational till 2016 as per Rio Tinto. The mine produces copper and magnetite.
Although certain studies are being conducted to expand the life of the mine to 2030, Rio Tinto does not seem interested in continuing its association with Palabora Mining. A spokeswoman for Anglo American also said that the operation was no longer of a sufficient scale to suit the Anglo American investment strategy. She added that they were confident that they would find a buyer.
In the first half of 2011 the company accounted for 8% of the total mined copper production for the international mining giant, Rio Tinto. They have a capacity to produce 80,000 metric tons of copper annually and South Africa is the main source of copper.
Rio Tinto and Anglo American are not the only companies cutting lose in South Africa. Both BHP Billiton and AngloGold Ashanti have sold some of their undeveloped land in the country this year. These actions should act as a warning to the South African government which is presently considering reforms to the mining industry with the looming threat of nationalization of all mines.