Rio Tinto has continued to try and turn its disastrous, overpriced $US38.1 billion Alcan acquisition into a positive by putting 13 of its aluminium units up for sale.
Assets from the 2007 Alcan takeover to go include six Australian and New Zealand units and seven others from Europe, the UK and US.
Rio Tinto says it hopes the move will improve the aluminium group’s financial performance, putting it in the bottom of the first quartile cost curve.
Shares in Rio Tinto gained 2.42 per cent, or $1.65, to a four-week high at $69.95 on Monday.
Among the Australian assets is the poorly performing Gove bauxite mine in the Northern Territory, which has fallen well short of its 3.8 million tonne-a-year production target despite a $3 billion to $4 billion expansion.
Rio Tinto Alcan chief executive Jacynthe Cote, who has supervised the Gove expansion, said there was nothing wrong with the assets on the market, which employed 6000 workers.
They were well managed and sound but did not align with Rio Tinto’s strategy of operating “top-tier assets” that were large scale, low cost and long life, she said.
Aluminium contributed an improved $379 million in first half net earnings to Rio Tinto’s record $US7.6 billion profit. This contribution was due mainly to price movements.
Regarded as Rio Tinto’s biggest mistake, the Alcan acquisition cost 30 per cent above market price and left the global giant saddled with massive short-term debt it has been paying ever since, amid the global financial crisis following the takeover.
One analyst told AAP the assets Rio Tinto wanted to divest would be hard to sell because they were not making money.
“There will be smaller-type companies that might take some of these on,” the analyst said.
The analyst also said there was “no way” Rio Tinto could achieve its publicly stated target of a 40 per cent earnings before interest, tax, depreciation and amortisation margin for the Aluminium division with its present portfolio.
“It’s a way of streamlining that portfolio and put time and space between the ill-fated (circa) $40 billion purchase of Alcan.”
As well as Gove, the Australasian assets include the Queensland Boyne smelters and Gladstone Power Station along with smelters in New Zealand.
They will now be separated as a business unit from Rio Tinto Alcan under the banner of Pacific Aluminium.
Ms Cote said the strength of the company’s balance sheet meant it could take its time and wait until the economic climate improved before selling the assets.
Other Queensland assets including the QAL and Yarwun refineries at Gladstone and Weipa bauxite mine will not be divested, with Yarwun’s capacity to be doubled.
