Rio to pare back Alcan portfolio

Tinto is planning to sell some Alcan smelters and refineries as it embarks on a program to turn around the business.

When it made the $37 billion deal in 2007 to acquire Alcan,  which caused it so much pain, Rio announced a program to sell a number of assets so it could focus on the "upstream" business of aluminium smelters or bauxite refineries.

With most of these sales accomplished, Rio chief financial officer Guy Elliott said the Alcan business still had to improve, and asset sales were likely to be part of the plan.

"We have to look critically at some of the assets -- smaller, older assets that exist in the portfolio that maybe don't have much upside in terms of expandibility or extension of life," Mr Elliott told The Australian.

"Maybe we're going to have to find another owner for those."

The asset sales would form part of a threefold strategy that would also focus on cutting costs and getting more out existing assets, as well as investing in new assets.

Mr Elliott said the assets were both smelting and refining facilities.

"What we're talking about now are some not insignificant assets. They are all generating cash. They are assets which play to our skills," he said.

"We'd like to sell them at good prices if we do sell them -- that means we need the climate to improve a little bit."

Alcan has more than 20 smelters and fiverefineries worldwide. At an investor briefing last month, Rio chief executive Tom Albanese said some of Rio's smelters were in the expensive half of the industry cost curve.

These would need to improve, or they would be considered for closure or disposal, he said.

Rio's Alcan acquisition, at the top of the market, loaded the company's previously conservative balance sheet with $US40bn of debt just before the global financial crisis hit.

The crisis made it hard to sell assets to alleviate the debt and eventually forced Rio to conduct a $US15 billion rights issue last year.

To date, it has sold $US10.3bn （$10.4bn） of the more than $US15bn it had hoped for.

The Alcan business, which is based in Montreal and includes Rio's previously owned aluminium assets, logged a $US578 million loss last year, almost $US2bn less than the previous year's profit of $US1.3bn.

Things are looking a little better this year, with the assets delivering a $US358m first-half profit.

"We need to do further business improvement," Mr Elliott said. "That doesn't just mean cutting costs, it means extracting more, sweating the assets harder, getting more throughput out of the same kit, investing modestly to creep the capacity.

"It also means seeking higher value-add from products."

Mr Elliott said the first substantial capital spending on Alcan since the acquisition was "on the horizon".

The two most likely options are the $US2bn-plus expansion of the Kitimat smelter in British Columbia, progress on which has been slowed down since the GFC, and the AP5X technology pilot plant planned for Quebec.

Rio has taken 50,000 workers off its books through asset sales since the GFC, most of them from the Alcan business.

Mr Elliott said that for now, Rio would hold on to the Alcan cable business, which was excluded from a deal to sell the Alcan engineered products group in August.

"That business serves the US housing markets, which, as you can imagine, is stressed, so we're keeping on holding that for the time being," he said.