Rio Tinto follows BHP's lead, looks to sell its higher-cost aluminium assets

By Admin
Share
Like its counterpart BHP Billiton, Rio Tinto is looking to shed some of its non-core assets.The global mining company is looking to sell its Pacific Alu...

Like its counterpart BHP Billiton, Rio Tinto is looking to shed some of its non-core assets.The global mining company is looking to sell its Pacific Aluminium division in a potential $1 billion deal, after cancelling it two years earlier.

The move of restructuring marginal assets is becoming a trend among mining groups.

 Related content: BHP Billiton Splits into Core and Non-Core Operations

According to the Financial Times, Rio is said to have hired Credit Suisse to find a buyer for Pacific Aluminum, also known as PacAl.  

By cutting its higher-cost aluminium assets, Rio Tinto will focus on its lowest-cost smelters and the mining of bauxite, which is used in the processing of aluminium.

Pacific Aluminium earnings before interest, tax, depreciation and amortisation rose from $252 million in 2013 to $524 million last year. 

Unlike BHP Billiton’s South32, Rio Tinto has not created a separate spinout vehicle.

Since 2011, Rio Tinto has considered selling off Pac Al and almost went through with its in 2013 before backing out after failing to attract a high enough price to satisfy new chief executive Sam Walsh.

Rio Tinto acquired Canadian aluminium group Alcan in 2007 for $38 billion, a highly priced deal that contributed to financial problems as the aluminium market rapidly became dominated by low-cost Chinese supply. The disastrous deal, which almost brought Rio Tinto to bankruptcy, led to the dismissal of its previous chief executive, Tom Albanese.

Sources believe the aluminium assets could fetch more than $1.2 billion based on the EBITDA multiple of five times.  A notable detail, which could be used to Rio’s

Behind iron ore, aluminium is the second biggest contributor to Rio Tinto’s underlying earnings. The company generated roughly $47 billion in revenue in 2014, with $12.1 billion accumulated by its aluminium segment.  

 Related content: Report: Rio Tinto ready to talk M&A deals

A spokesman for Rio Tinto said the company "doesn't comment on market speculation".

Mining companies following the trend set forth by BHP Billiton includes Anglo American, Barrick Gold and Freeport-McMoRan

Stay connected! Follow us on Twitter and like us on Facebook 

Check out the latest edition of Mining Global

Share

Featured Articles

Intel Ridding its Supply Chain of Conflict Minerals

Intel first began to work towards responsibly sourced conflict minerals from the Democratic Republic of Congo and adjoining countries about 12 years

IEF on 'Paradox' of Mining's Role in Quest for Clean Energy

International Energy Forum says mining is the 'paradox' at heart of quest for clean energy but recognises the industry is addressing sustainability issues

ABB Reduces its Industrial e-Waste Impact

Leading global engineering company ABB – with strong mining presence – cuts industrial e-waste by promoting reuse and recycling in a push for circularity

Mining Automation Drives Efficiency and Safety Gains

Digital Mining

New Schneider SBS Energy Solution for Mining Sector

Smart Mining

Mining Conflicts Hit Communities As Battery Demand Soars

Sustainability