LONDON (ShareCast) - Rio Tinto’s Chief Executive Officer, Sam Walsh, has abandoned plans to sell the group’s diamond business after failing to attract a buyer willing to offer the two-billion-dollar price tag. Walsh is now faced with finding an alternative route to improve returns to shareholders to cut the miner’s debts, according to The Telegraph’s Questor column. “Diamonds may sound precious but they represent little more than a modest business for a group more heavily involved in the dirty end of the mining business,” the column said. Rio accounts for about 10% of the diamond market and production from its three mines last year generated just over 1.0% of group revenue and earnings before interest, tax, depreciation and amortisation (EBITDA). “Walsh now has his work cut out to deliver the goods for shareholders. Hold.”

Kazakhmys has accepted an offer from Eurasian Natural Resources Corp.’s founders and the Kazakh government to take over the copper mine. The bid includes $2.65 in cash and 0.23 Kazakhmys shares for each ENRC share. It amounts to 234p a share – well below the average 575p a share the copper miner paid for ENRC since it started building up its 26% stake in 2007. The bidders’ offer is in line with an earlier approach in late May but the terms have deteriorated as the pound has slipped against the dollar, Kazakhmys’s shares have fallen, and copper continues to decline. “This is a problem given that final approval still rests on a vote by Kazakhmys’s ordinary shareholders, who own 37% of it," the Financial Times’ Lex column reported. “While the price is pitiful, minorities have little choice. ENRC’s shares have halved over the past year and are unlikely to recover much amid corporate governance concerns and an investigation by the UK Serious Fraud Office.” Nevertheless, the $890m Kazakhmys would receive in cash for the sale will contribute $4.0bn it is planning to spend on project expansions over the next two years. Therefore, Lex recommends Kazakhmys’s minority shareholders should take the offer.

European industrial property developer SEGRO has confirmed it is in talks with Public Sector Pension Investment Board regarding the contribution of the bulk of SEGRO's Continental European logistics portfolio to seek a joint venture. Talks are at an advantaged state and the venture will acquire the bulk of that logistics portfolio, with Segro managing it with a 50% stake. The Times' Tempus column highlighted the struggles in the Eurozone and Segro’s £2.bn of debt in such a deal. Chief Executive Officer, David Sleath, has made clear that warehouses and other assets, often located at or near ports, airports and big roads, were seen as attractive investments. However, given its level of debt, he said the company plainly could not go it alone and he emphasised at the time a willingness to bring in third-party investors. “The financial crisis has meant underinvestment in such properties and an undersupply; the company has indicated that it is targeting something approaching £3.0bn,” Tempus said. Some fear Sleath may choose to make further inroads into debt by means of an equity issue. Until the issue is resolved, its shares are high enough. They were trading at above the last declared net asset value of 294p a share.

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RD

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