Private equity firms Apollo and Blackstone and miner Glencore are believed to be out of the bidding race for Rio Tinto's majority stake in Iron Ore Company of Canada, signalling a lacklustre sales environment.
Rio Tinto received bids from six firms in the second round held in July, and most were less than Rio's expected value of around $3.5bn to $4bn for its stake, reports Reuters, citing sources familiar with the matter.
Only two firms have been shortlisted for the majority stake - Canadian firm Teck Resources, while the other bidder could be a consortium of Chinese buyers, according to the sources.
Iron Ore Company of Canada is one of the several assets that Rio Tinto has put up for sale as it attempts to cut surging debts amounting to $19bn and close non-profit making operations in order to retain its single-A credit rating.
Iron Ore Company's operations are located in Labrador City in Newfoundland and Labrador, Canada's easternmost province.
Rio Tinto owns 59% stake in IOC, while Labrador Iron Ore Royalty and Mitsubishi hold a 15% and 26% equity respectively.
IOC has a capacity to produce approximately 22mt of iron ore concentrate per year.
Earlier this year, Rio Tinto appointed investment banks Credit Suisse and the Canadian Imperial Bank of Commerce to offload its stake in IOC.
Weak demand, escalating production costs and low prices have compelled several mining companies to implement cost reduction strategies across their operations.
Since the beginning of 2013, iron ore prices dropped by 24%, copper by ten percent and thermal coal by seven percent.
Low offers may raise concerns over the future of the sale of dozens of Rio's assets, especially given the tough markets conditions - in June, the firm was pushed to withdraw the sale of its $1.3bn diamond business as buyers were unwilling to pay the expected price.
Image: IOC has capacity to produce approximately 22mt of iron ore concentrate a year. Photo courtesy of Rio Tinto Company.