Xstrata's stake in St Ann Bauxite Company sold in US$1.15-billion deal to Apollo

Anglo-Swiss miner Xstrata, which holds a 50 per cent stake in Jamaica's St Ann Bauxite Company, has agreed to sell its aluminium business to private equity firm Apollo Management for US$1.15 billion in cash.

The St Ann Bauxite Company was formerly named Kaiser Jamaica Bauxite Company and was jointly owned by Kaiser Aluminum and the Government of Jamaica. The mine employs around 500 people and has an annual bauxite production capacity of 4.5 million tonnes of ore.

Last year Xstrata acquired the aluminium business through its purchase of Canadian miner Falconbridge for C$17 billion. In 2004, Falconbridge acquired a 50 per cent interest in the St Ann Bauxite Company from Kaiser. The mine is located on the north coast of Jamaica in Discovery Bay. Century Aluminum Company acquired the remaining 50 per cent interest in the asset. Falconbridge and Century each paid half of the US$23-million total price.

Explaining the reason for the sale to Apollo Management, the buyout firm run by Leon Black, Xsrata's Chief Executive Officer Mick Davis said the company wanted to focus on more profitable commodities.

"Our review concluded that these assets do not provide Xstrata with the necessary scale or upstream exposure to represent a suitable entry point from which to build a world-class aluminium business," said Davis.

The price of aluminium has fallen behind other industrial metals such as copper and nickel due in the main to increasing supply from China, which has become the largest producer of metal.

Xstrata has become one of the world's leading miners and is now challenging the likes of BHP Billiton, Rio Tinto and Anglo-American. Earlier this year it bought Canada's LionOre for US$4 billion and last week snapped up Australia's Gloucester Coal for US$320 million.

"The disposal of the aluminium business was always on the cards. The proceeds are in line with our expectations and covers a quarter of the expected cash outlay required for LionOre and Gloucester Coal," said Nick Hatch, an analyst at Investec Securities in London.

Xstrata is 35 per cent owned by the Swiss commodities giant Glencore. The company mines copper, coal, thermal coal, ferrochrome, nickel, vanadium and zinc.

"The sale to a private equity group is interesting as many market commentators believed the most likely buyer would be Century Aluminum, which jointly holds upstream assets with Falconbridge through a joint venture, such as Jamaica's St Ann Bauxite Company. Apollo's acquisition will provide stability in revenues as aluminium is less volatile than other industrial metals," said Numis Securities.