DBRS Comments on Rio Tinto’s $1.6 Billion Asset Sale

DBRS notes that today Rio Tinto Plc and Rio Tinto Ltd. (collectively Rio Tinto or the Company) announced that the Company has signed definitive agreements to sell certain potash and iron ore related assets to Companhia Vale do Rio Doce (Vale) for a total cash consideration of $1.6 billion. Rio Tinto indicates that the proceeds from these divestments will be used for the repayment of debt.

DBRS view this asset sale as positive news as the Company executes its stated plan to reduce its leverage through a wide variety of measures, including approximately $10 billion in asset sales in 2009. DBRS continues to rate Rio Tinto at A (low) and R-1 (low) Under Review with Negative Implications as we assess the impact of the economic downturn on the Company and the success of Rio Tinto’s efforts to reduce leverage and meet refinancing needs.

Rio Tinto’s announcement indicated that the asset sales include the Corumbá iron ore mine in Brazil and the associated river logistics operations in Paraguay, which earned $6 million for the six months ending June 30, 2008 and $12 million for the year ended December 31, 2007. Corumbá gross assets as at June 30, 2008 were $263 million and Rio Tinto says it will assign $750 million of the expected proceeds of the sale transactions to the iron ore assets.

The Company also indicated that the proposed sale includes its undeveloped potash assets, including the Potasio Rio Colorado potash project in Argentina and potash exploration assets in Canada. The Argentinean assets had a gross value at June 30, 2008 of $33 million and the Canadian potash assets were at the exploration stage. Rio Tinto says it will assign $850 million of the expected proceeds from the transactions to the potash assets.

Completion of the Corumbá transaction remains subject to receipt of the relevant regulatory approvals, and the Company indicates that no approvals are required in order to complete the potash transaction. Rio Tinto is targeting receipt of proceeds from the sale of the potash assets in February and from the iron ore related assets some time in the second half of 2009.

DBRS views the assets being sold as being peripheral to Rio Tinto’s core businesses.

Note:
All figures are in U.S. dollars unless otherwise noted.

For more information on Rio Tinto, please see the DBRS press release published November 26, 2008, and Rio Tinto’s ratings report dated November 19, 2007.