Rio's Cloud Peak IPO disappoints

Cloud Peak Energy, a unit of Rio Tinto, priced shares in its initial public offering below expectations.

The shares of the Gillette, Wyoming-based company sold for $US15, raising about $US459 million.

Cloud Peak had expected its shares to sell for between $US16 and $US18 each, according to a regulatory filing.

Most of the money raised will go to Cloud Peak's parent company, Anglo-Australian miner Rio Tinto. Rio Tinto will retain a 48.3 percent stake after the sale.

Rio Tinto shares were down $1.41, or 1.9 per cent, in early trade on the ASX, to $71.19.

Cloud Peak is the third largest US producer of coal and owns surface mines in Wyoming and Montana. In 2008, coal from its mines generated about 4.4 per cent of the electricity produced in the United States, according to a filing with the US Securities and Exchange Commission.

Cloud Peak reported sales of $US1.06 billion for the nine months ended Sept. 30, up 17.4 per cent over the year earlier results, with a profit of $US190.1 million.

Cloud Peak shares are set to begin trading later today on the New York Stock Exchange under the symbol "CLD."

The IPOs underwriters, led by Credit Suisse, Morgan Stanley and RBC Capital Markets, have the option to buy another 4.59 million shares.

Reuters, with BusinessDay.com.au