Newmont selling stake in coal miner

Newmont Mining’s (NYSE) attempt to reduce its debt by selling non-core assets continued recently when the Denver company agreed to sell its 54.97% stake in Peabody Holding Co. to a U.S. subsidiary of Hanson Industries for US$7.15 million. Based in England, Hanson Industries owns 49% of Newmont by virtue of having merged last year with British mining conglomerate Consolidated Goldfields.

The sale of Newmont’s interest in Peabody, the largest coal producer in the U.S., has already been approved by all Newmont directors not affiliated with Hanson. However, the transaction is still subject to the approval of 80% of Newmont’s common shareholders.

While the sale is expected to close in June, Newmont can still receive future dividends equivalent to its share of 75% of Peabody’s 1990 earnings through to closing. Peabody is regarded as a stable source of cash as its dividends to Newmont average US$50 million a year.

Later this month, Hanson expects to acquire the 45.03% Peabody interest not held by Newmont for the equivalent of US$517.5 million. The amount includes dividends of US$13.1 million paid out since January.

“The sale of our Peabody shares will not only realize a fair price, but it will also achieve Newmont’s basic objective to reduce debt to appropriate levels,” said Chairman Gordon Parker.

Cash proceeds from the sale will be about US$600 million after tax and expenses which, when applied to Newmont’s debt repayment plan, should reduce the company’s annual interest costs to US$20 million net. Newmont’s long-term debt load stands at about US$1.1 billion.

Also, Newmont has granted Toronto-based Consolidated TVX Mining the right to earn a 50% stake in the Andes de Ouro mine project in Chile. To earn the interest, TVX must spend US$2.2 million on exploration.

Situated in mountainous terrain, 60 miles from Santiago, the property could contain as much as 500,000 oz. gold, according to TVX President Ian Telfer who has yet to table plans for future exploration.