Rio Tinto’s costly and overpriced 2007 takeover of Alcan for more than $44 billion continues to haunt the group.
The deal crippled Rio, nearly bringing it to its knees in the GFC as it was forced to raise cash at a big discount from shareholders and sell equity to Chinese interests.
The Chinese iron ore boom saved it and last week the company reported record production from the huge mines it owns in WA.
But yesterday it revealed the results of a review of its aluminium business and said it will sell 13 underperforming business units worldwide, including refineries and smelters in Australia.
Rio said in a statement the moves were part of a streamlining its aluminium group following the strategic review, but did not currently involve any job redundancies.
The company didn’t give any values for the assets involved, sales or profitability (or losses).
But analysts said the 13 businesses could be valued at $US8 billion and account for 20% of the company’s aluminium division.
Rio has already sold assets from the division on the manufacturing side.
Analysts also said that of the $US8 billion total, the assets in Australia and NZ to be sold (and to be called Pacific Aluminium), could be worth $US6.5 billion and would likely be listed on the stockmarket in the next couple of years.
Rio also didn’t give any idea of timing of the sales except to say that they might not happen for a while.
But it is clear it is getting rid of the dregs of the Alcan business, leaving it with Alcan’s high quality Canadian assets and those of the old Comalco in Queensland, especially at Weipa and Gladstone.
Rio shares rose $1.65, or 2.35%, to $69.95. The shares eased in afternoon trading.
The asset sales include operations in Australia, such as the Gove bauxite venture and Tasmania’s Bell Bay smelter.
It will also offload assets in New Zealand and plants in France, Germany, the US and the UK.
"The strength of our balance sheet means that we can choose the most opportune method and timing to divest these assets, which may not occur until the economic climate improves," Rio Tinto Chief Executive Tom Albanese said in a statement.
The company’s revamp includes the creation of a separate unit for some assets in Australia and New Zealand, prior to their spin-off from Rio.
"Rio Tinto’s interests in six Australian and New Zealand assets will transfer into a new business unit, to be called Pacific Aluminium, and be managed and reported separately from the Rio Tinto Alcan product group prior to divestment," the statement said.
These assets include the Gove bauxite mine and alumina refinery and Boyne Smelters and the associated Gladstone Power Station in Queensland. Also added to the new unit will be the Tomago smelter near Newcastle in NSW and the Bell Bay smelter in Tasmania.
The New Zealand asset sell-off includes its New Zealand Aluminium Smelters, the company said.
"A second group of seven non-core assets will continue to be managed by Rio Tinto Alcan while it further investigates divestment options," the company said.
In Europe, the assets earmarked for divestment include three specialty alumina plants and the Gardanne refinery in France and Germany, and the Sebree smelter in the UK. Also in the UK, Rio will look to spin off or close its Lynemouth smelter and associated power station.
Mr Albanese said the assets identified for divestment were sound businesses that were well-managed with productive workforces, but they were no longer aligned with the company’s strategy.
He said the move was another step towards achieving performance targets in the Aluminium product group.
‘‘We have already made good progress, with plans in place to generate sustainable performance improvement, and we are investing at a number of our core assets,’’ Mr Albanese said.
Rio said the CEO of Pacific Aluminium will be Sandeep Biswas. He will report to Rio Tinto business support and operations group executive Bret Clayton.
