Rio Tinto Group (RIO), the world’s second- biggest mining company, may take a $5 billion one-time charge at its full-year results to further write down the value of its aluminum assets, Deutsche Bank AG said.
“The division is struggling due to declining prices and rising costs and second-half earnings are expected to be breakeven,” Deutsche Bank analysts led by Paul Young said yesterday in a report. The bank values the unit at $41.1 billion, of which $19.8 billion is goodwill.
Rio last month said it planned to sell 13 aluminum assets, including smelters and alumina plants in Australia, the U.S. and U.K., to improve its financial performance. The company has cut its net debt to $7.9 billion after borrowings ballooned to $40 billion with its acquisition in 2007 of Alcan Inc.
Since 2008, Rio has sold $3.2 billion of aluminum assets, written off $6.6 billion in goodwill and written down $1.2 billion in assets, said the bank, which rates the company a “buy” with a share target price of A$98.10.
The company is likely to book some one-time charges in its aluminum and diamond divisions at its full-year results scheduled in February, Chief Financial Officer Guy Elliott said msg yesterday during an investor webcast. It also increased the cost estimate for its planned expansion of the Kitimat smelter in British Columbia to $3.3 billion, from $2.5 billion.
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