Rio: BHP can sell stake in SA co

London - Mining group Rio Tinto has granted an option to BHP Billiton allowing BHP to sell its stake in South African joint venture Richards Bay Minerals, Rio said on Thursday.

The granting of the option was part of a restructuring of the business when it agreed a black economic empowerment (BEE) deal for a 26% stake, a statement said.

"The opportunity was taken to clarify the agreement between Rio Tinto and BHP," Rio spokesperson Nick Cobban said.

"Should BHP want to sell their remaining share of the operation to Rio Tinto, there is now an agreement in place allowing them to do so."

In September, the total Richards Bay business was valued by South Africa's Rand Merchant Bank at R19bn, the statement said.

Rio manages the operation, which contributed $325m to Rio's underlying EBITDA (earnings before interest, tax, depreciation and amortisation) last year.

The joint venture is split 50-50 and after the black empowerment deal is completed, each firm will own 37 percent.

If BHP exercises the "put" option, the sale price would be calculated at a fair market value based on discounted cash flows at the time of exercise.

Rio Tinto announced an expansion of its divestment programme on Wednesday in an effort to reduce its heavy debt load. Among the assets it has been seeking to sell are minerals units that produce borates and talc.

Rio has not said what other units it might sell, but one analyst said Richards Bay might be a candidate.

The Richards Bay business mainly produces titanium dioxide, a pure white, highly refractive, non-toxic substance used in paint and other coatings, paper, plastics and cosmetics.

Agreements with a black consortium were signed on Thursday under which 24% of Richards Bay Minerals will be transferred to a group made up of local communities and investors and a further 2% will go into a trust for the benefit of employees.

- Reuters