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Rio Tinto completes sale of Cortez Gold Royalty for $525 million in cash

City AM logo City AM 02/08/2022 Nicholas Earl

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Rio Tinto has completed the sale of a package of royalties, including a stake in the Cortez mine operational area to RG Royalties in a $525m deal.

The miner held a 1.2 per cent gross production royalty on the Cortez gold mine, which is operated by Nevada Gold Mines.

It also held a stake in a joint venture between Barrick Gold Corporation (Barrick) and Newmont Corporation, alongside the Fourmile project which is 100 per cent owned and operated by Barrick. 

The company obtained the royalty as partial consideration for the sale of its 40 per cent interest in the Cortez Complex to Barrick in 2008.

Royalty payments commence once the Cortez Complex has produced a total of 15 million ounces of gold since 2008 -which is expected to occur imminently.

Rio Tinto’s  Chief Financial Officer Peter Cunningham said: “This transaction unlocks hidden value from our portfolio and releases cash immediately.”

The company is keen to raise funds after reporting a 29 per cent drop in profits during the first six months of trading this year, amid weaker prices for iron ore as demand eased from top consumer China.

The drop in earnings has caused the multinational miner to slash its dividend in half, with the company also weighed down by higher costs driven by inflation and skilled labour shortages.

The company also cut its capital investment forecast for 2022 by $500m to $7.5bn.

The hit represents a sharp turn in fortunes for the miner which in February unveiled a £12.4bn dividend for its shareholders, the second largest in the history of the London Stock Exchange.

Rio Tinto has also been plagued with scandal following its destruction of a sacred Aboriginal cave system last year, which sat on top of around £75m worth of high-grade iron ore.

The cave system, in the Juukan Gorge near Pilbara, had shown signs of continued human occupation for more than 46,000 years – before it was blown up.

A new leadership team was brought in after a severe backlash from shareholders, consumers and politicians, and the company commissioned an internal workplace review into its business culture.

This revealed 21 reports of actual or attempted rape in the past five years alongside widespread bullying and discrimination.

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