Rio Tinto : Cloud Peak Public Offering Could Yield $573 Million

Mining giant Rio Tinto PLC (RIO: 68.93, 0.00, 0.00%) Thursday announced a secondary public offering of Cloud Peak Energy Inc. (CLD: 20.00, 0.00, 0.00%) shares that could result in a full divestment its stake in U.S.-based coal company and gross proceeds of about $573 million.

The secondary offering is part of Rio Tinto's decision to sell out of a large chunk of its investment in the U.S. coal market.

"With the proceeds from the Cloud Peak Energy transactions and the sale of Jacobs Ranch, the total gross proceeds for the divestment of the majority of Rio Tinto Energy America will be at least $2.0 billion," Rio Tinto's Chief Financial Officer Guy Elliot said in a statement.

The Anglo-Australian miner plans to offer 25.6 million shares of Cloud Peak common stock at $19.50 a share, resulting in gross proceeds of $499.2 million for Rio Tinto.

The deal is expected to close on, or around, Dec 21. Once the offering has been completed, Rio Tinto will retain a 6.2% stake in the mining company.

Should the underwriters of the deal choose to exercise an over allotment option to buy up to 3.8 million additional shares of Cloud Peak, then Rio Tinto would have sold out of its entire shareholding in the company. The exercise of the option would generate $74.1 million in gross proceeds, bringing the total to about $573 million.

Rio Tinto is divesting of its stake in Cloud Peak at a time when the coal miner has seen its bottom-line pressured by slimming margins--though it reported last month its third-quarter revenue increased on higher production. The producer of so-called thermal coal, the type burned by power plants, faces low natural-gas prices pressuring the commodity's value.

Cloud Peak, which went public in November 2009, was "carved out" of Rio Tinto and includes most of the mining giant's coal operations in the western U.S.

Cloud Peak had about 31.5 million shares outstanding as of Oct. 31. It would not receive any proceeds from the transaction.

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