Rio Tinto in talks to sell aluminium assets to GFG Alliance
Steel tycoon Sanjeev Gupta keen to buy mining group’s Pacific Aluminium business
Rio Tinto, the Anglo-Australian mining group, is in advanced talks to sell its aluminium assets in Australia and New Zealand to GFG Alliance, the investment company run by steel tycoon Sanjeev Gupta.
Mr Gupta is flying to Australia this week to continue discussions with Rio and look over a large power station in Gladstone, which is included in the sale, according to people familiar with the matter.
While the talks could end without agreement, Mr Gupta is keen to buy Rio’s Pacific Aluminium business as he looks to build a global industrial conglomerate spanning metals, power, renewable energy and finance.
But he could face competition from Century Aluminum, a business 47 per cent owned by Swiss commodities group Glencore, which has also been casting an eye over PacAl, as the business is known.
PacAl consists of three smelters and a power station in Australia, as well as a plant in New Zealand. It employs more than 2,000 people and in the six months to June recorded net income of $92m, up from $29m a year earlier.
GFG, Rio and Glencore all declined to comment.
Rio has tried to sell or spin-off PacAl on several occasions but the market is now more conducive to a deal, say bankers.
The price of aluminium recently hit its highest level for more than five years, buoyed by China’s efforts to reduce excess capacity and excitement about electric vehicles. By dint of its light weight, aluminium has been touted as ideal for the bodies of battery-powered cars.
Jean-Sébastien Jacques, Rio’s chief executive, has made no secret of his willingness to sell PacAl, telling analysts and investors in August that he was prepared to entertain offers for the business if they were at the right price.
Since he took the reins at Rio in the summer of 2016, Mr Jacques has moved to reshape the company’s portfolio and focus on its core assets including its low-cost aluminium smelters in Canada, as well as iron ore and copper.
Rio sold its Lochaber aluminium smelter in Scotland to Mr Gupta for $410m last year and in the summer offloaded a big coal business to a state-backed Chinese buyer for almost $2.7bn.
The group is now working with Credit Suisse to sell the rest of its coal assets, according to people with knowledge of the situation. Those assets could fetch up to $2bn.
Rio is also seeking buyers for aluminium smelters in northern France and Iceland, which could also interest GFG.
For Mr Gupta, buying PacAl would be his latest deal in Australia. In July, the India-born businessman won the auction for collapsed mining and steel group Arrium, beating competition from a South Korean private equity consortium.
Mr Gupta has said that he will invest $1bn in a new plant and equipment at Arrium’s Whyalla steelworks in south Australia to boost efficiency and production.
To oversee that investment and the integration of Arrium into GFG’s steel business, Mr Gupta is planning to base himself in Australia for the next couple of years, according to people with knowledge of his plans.
Rio is scheduled to publish a trading update later on Monday. Some analysts believe the company might be forced to revise down its iron ore production forecast of 330m tonnes for 2017 because of weather-related problems earlier in the year.