Rio Tinto retreats from aluminum and USD 8 billion assets on block

 

 

Rio Tinto said that it planned to sell 13 assets including smelters and alumina refineries in a move immediately interpreted as a way of diverting yet more resources to iron ore which now accounts for nearly 80% of group earnings.

 

 

Mr Gavin Wendt senior mining analyst for Mine Life in Sydney said that "It's all about returns and these big miners Rio included are always re evaluating their businesses. And iron ore is currently a real cash cow for Rio Tinto. The sale which would leave Rio Tinto's remaining Aluminum business focused mainly on its more profitable Canadian operations is designed to help the group more than double its Aluminum earnings margins to 40% by 2015.”

 

 

Mr Peter Chilton resources analyst at Constellation Capital Management said that "The only way they can achieve that is by getting rid of all these assets which can never be world class."

 

 

Mr Jacynthe Cote CEO of Rio Tinto Alcan said that "We're going to be in no rush to sell. She declined to say whether Rio Tinto was already in talks with potential buyers.

 

 

Mr James Bruce portfolio manager at Perpetual said that "It's a well thought-out plan to realize value that might not be recognized in the current Rio share price and should deliver benefits to shareholders in the medium to longer term."

 

 

Industry analysts said that smaller buyers were more likely to be interested in these assets than major producers such as Russia's UC RUSAL or Chinese state owned Chinalco. Like Rio Tinto, the big producers are all chasing higher return assets.

 

 

Mr Henry Liu of Mirae Asset Securities in Hong Kong said that rising Chinese Aluminum output has been undermining global prices for the metal. The aluminum industry has been suffering because of over capacity coming from China. This has led to very thin margins. It's very difficult to compete with Chinese producers."

 

 

Rio Tinto said that it would sell assets in Australia, New Zealand, France, Germany the United States and Britain to focus on its hydro powered plants in Canada. It also planned to keep its Weipa bauxite mine in Australia.

 

 

Bauxite is used to make alumina which is in turn used to make Aluminum, a light weight and flexible metal used in a vast array of industrial and consumer products, from packaging and aircraft manufacturing to electrical cables and insulation.

 

 

The group said that a new unit, Pacific Aluminum, would hold the six Australian and New Zealand units being put up for sale, including Australia's Gove bauxite mine and alumina refinery and Tomago smelter and its New Zealand smelters.