LONDON MARKETS: Rio Tinto Rallies, But London Stocks Turn Lower

By Steve Goldstein

Rio Tinto shares rallied in London on Friday as the mining giant was able to take a step toward cutting $10 billion of debt by selling iron ore and potash assets to Brazil's Vale.

Rio Tinto (RTP), which only on Wednesday had admitted that it may need to sell stock, said it will sell potash assets for $1.6 billion to Vale (RIO).

Coming on the heels of Xstrata's $5.9 billion rights offer, Rio said the deal "demonstrates the depth and quality of our asset portfolio and our ability to unlock value for shareholders despite tough credit markets and economic conditions."

Analysts at Canaccord Adams said the ore was sold for 8.5 times estimated earnings before interest, tax, depreciation and amortization this year -- vs. the 1.9 times that Rio trades on. They are located near Vale's Ucrum iron ore and manganese operations, however, which benefits the Brazil firm.

Rio Tinto hadn't approved the potash project so the assets were carried on its balance sheet at $33 million.

Rio Tinto shares climbed 4.3%, even as many of its mining peers dropped.

Xstrata shares slipped 0.4% and BHP Billiton dropped 6.7%.

Property stocks also were in favor as Morgan Stanley urged switching to U.K. ones from Continental European groups. Land Securities and Hammerson each rose over 4%.

More broadly, the FTSE 100 turned lower by midday, as U.S. stock futures also lost ground. The FTSE 100 fell 0.6% to 4,164.00.

Besides the miners, Shell also was a drag, falling 3% a day after its mixed report of a $2.8 billion loss but an increase in dividend.

AstraZeneca (AZN) wavered between gains and losses after Thursday's 6.3% fall from its flat sales outlook.

Deutsche Bank upgraded the stock to buy from hold, with the broker saying the sell-off was overdone. But Citigroup cut the stock to hold from buy on the group's outlook.

Outside the FTSE 100, Henderson Group rallied 15.7% as it reached a deal to buy rival New Star Asset Management , the debt-laden U.K. fund manager, for 115 million pounds.

"A neat deal by Henderson, it should give them in excess of 50 million pounds of relatively stable revenues and enhance earnings even after the 31 million pounds of restructuring costs," said analysts at Evolution Securities.

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