SYDNEY (Reuters) - Rio Tinto (RIO.AX) (RIO.L) is attracting renewed interest in selling its Pacific Aluminium smelting unit by adding two alumina refineries in Australia to the portfolio, according to three sources familiar with the matter.
Rio Tinto had tried to sell the division minus the refineries in 2011 and again in 2015 without success.
Switzerland-headquartered Glencore (GLEN.L), Liberty House of Britain, and Russia’s Rusal (0486.HK) have all expressed interest, according to the sources, who declined to be named because they are not authorised to speak to media.
By including the refineries, Rio could potentially double the original $1 billion price tag for Pacific Aluminium, the sources said. Pacific Aluminium originally included Rio Tinto’s Bell Bay, Boyne Island and Tomago smelters in Australia, and the Tiwai Point smelter in New Zealand.
Glencore, Liberty House and Rio Tinto declined to comment on a potential sale or any discussions on the matter. Rusal could not be reached. Glencore, a global trader of aluminium, already ships copper, and other commodities from ports near the refineries.
Liberty House purchased Rio’s Lochaber aluminium smelter in Scotland a year ago for $412 million. More recently it acquired Australian steel group Arrium. By including its QAL and Yarwun alumina refineries in the sale, Rio stands to lift the odds of ridding its books of the holdings, after the failure of the most recent attempt under former chief executive Sam Walsh, the sources said.
“We view inclusion of the refineries into the mix as a stamp of the new leadership at Rio, increasing the chances of a sale,” a fund manager with exposure to Rio Tinto said. Current chief executive, Jean-Sebastien Jacques, who took over in July 2016, is acting rapidly to divest all but Rio Tinto’s best-performing units.
Rio sold its coal & Allied thermal coal division in June for $2.7 billion. It is also in the process of selling two Australian coking coal mines.
Adding the refineries to the sale comes amid a strong market for alumina, which is derived from bauxite and used to make aluminium. Alumina prices have gained 50 percent since August to $450 a tonne on expectations that China will boost imports to compensate for production cuts at home to fight pollution.
“If ever there was a time to have a supply source for alumina outside of China, it’s now,” said Argonaut analyst James Wilson. “For Rio, it make sense. For a buyer, such as a Glencore or a Rusal, it makes sense.”
Rusal already controls 6 percent of the global alumina market and is a 20 percent partner with Rio in the QAL refinery.
Reporting by James Regan; Editing by Tom Hogue