By Hector Forster and Jeremy Lovell

March 23, 2018 - Coal mining company Rio Tinto is selling its last remaining Australian coking coal asset, Kestrel, shifting growth into investments in metals and minerals for batteries and new economy applications.

The company is close to a complete withdrawal from metallurgical coal, after divesting Hail Creek and other coal assets in Queensland and New South Wales over the past year.

Rio Tinto remains the second-largest iron ore miner in the world, as well as leading iron ore supplier to China. Maintaining a foothold in the old emerging economy model of China-led steel infrastructure and real estate demand comes with sky-high margins. It had 68% EBITDA for its Pilbara iron ore business last year.

Coking coal mining is part of the group's energy and minerals segment, which reported a 36% EBITDA margin. A series of spot pricing peaks for the commodity in the past two years had led to earnings volatility.

In Perth this week, the contrast with new industry focus on industrial metals was clear.

Perth, capital of Western Australia and head of Rio Tinto's regional iron ore operations, held its 21st annual global iron ore and steel forecast conference, while Rio Tinto chose to deliver a presentation at the inaugural Lithium & Battery Metals Conference organized at the same hotel.

Rio Tinto is incubating future mining ideas despite strong prevailing demand for steel raw materials, copper and aluminum.

Chinese environmental policy measures are increasing demand for higher grade iron ore and reducing new aluminium capacity, while global growth is driving demand for existing group commodities, said Andrew Latham, head of Rio Tinto Ventures at the Perth event.

"At the same time, we see the potential for a broader suite of metals to play an increasingly important role as new and disruptive technologies change the way we live," he said in prepared remarks for the event.

Venture Investments

The Ventures unit will review projects past feasibility study considering a variety of investment entry possibilities, and leverage the group's capital, operating expertise, exploration and marketing and logistics networks.

Rio Tinto cites tin, lithium, cobalt, silver, nickel as metals with the biggest impact from new technology, using research from Massachusetts Institute of Technology.

The company plans to finalize this year a study into the Jadar project in Serbia, which has deposits of lithium-sodium-borosilicate mineral. Rio Tinto said pre-feasibility is already well underway, started in 2015.

The site near Loznica has a potential 2.5 million mt of lithium oxide and 21 million mt of borates, with a long mine life potential from 136 million mt in total resources, it said.

An on-site plant around Jadar's underground mine complex producing battery grade lithium carbonate and boric acid is planned to start up in the early 2020s.

"The tripling of lithium prices over three years has drawn significant investor interest as major players jostle for dominance to supply multi-billion dollar supply deals fundamental to the electric vehicle battery revolution," UK investment bank SP Angel said in a note Wednesday.

"China is expected to top the list of mergers and acquisitions as companies seek control of the market to match government targets of 7 million vehicles by 2025."

Serbia will jostle with development tapping larger lithium resources in Chile, while being closer to demand in Europe. The "Jadarite" resources have potential to provide both lithium carbonate and by-product boric acid, Rio Tinto said.

With stronger coking coal prices since 2016, the Australian market saw divestments at Glencore, Wesfarmers and Anglo American.

Rio Tinto Thursday announced it agreed the sale of the Winchester undeveloped coking and thermal coal project in the north of Queensland's Bowen Basin to Whitehaven Coal.

On Tuesday, the company's sale of the Hail Creek low-vol hard coking coal mine to Glencore, along with the Valeria project, was announced. Rio Tinto sold Coal & Allied, a semi-soft and thermal coal producer in New South Wales, to Yancoal Australia in 2017. 

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