Rio sees no need for aluminum disposals

Global miner Rio Tinto Ltd/Plc does not expect to have to sell aluminum assets to win approval for its $38.1 billion takeover of Canada's Alcan Tinto said on Tuesday. But Rio Tinto Aluminium Chief Executive Oscar Groeneveld told Reuters after announcing plans for a $2 billion aluminum smelter in Malaysia that it might sell some of the combined aluminum assets anyway to fine-tune the portfolio. "We don't have overlap with Alcan assets so we do not expect any requirement in terms of selling off any of the assets," he said. "What we will do is look at all of the assets...in the combined Alcan-Rio Tinto portfolio, not just Rio Tinto Aluminium, and just look at what is not as good a fit, now that we have such a bigger business," he added. Industry analysts have raised questions about whether Rio Tinto will need to sell some aluminum assets to appease competition concerns, particularly among regulators in North America, Australia and Europe. Rio Tinto, set to become the world's largest aluminum producer ahead of Russia's UC RUSAL after the takeover, has already said it will sell Alcan's packaging business. Together, Rio Tinto and Alcan have the capability to make 4.4 million tonnes of aluminum a year, and both have major expansion plans to meet rising Asian demand for the metal. "This is a very positive development for Rio Tinto Aluminium and an important step in our plans to develop new greenfield aluminum smelting capacity", Groeneveld said of the proposal to build a 550,000-tonnes-a-year smelter in Malaysia's Sarawak state, on Borneo island. Even with prices trading off their historic 2006 highs, aluminum demand has been surging, driven largely by China and other developing economies, resulting in new smelters sprouting around the world and existing smelters being expanded. The Sarawak project would be powered by the huge 2,400-megawatt Bakun hydroelectric dam, now three-quarters complete and due to be finished in 2010. If the smelter is feasible, production would begin late in 2010 and could be scaled up to 1.5 million tonnes, making it one of the world's largest aluminum smelters -- and potentially needing an alumina refinery to be built alongside. Rio Tinto would be the major partner in a 60-40 venture with Malaysian builder Cahya Mata Sarawak (CMSM.KL: Quote, Profile, Research), part-owned by the family of Sarawak Chief Minister Abdul Taib Mahmud. "We now have to enter into those discussions with the state and federal governments," Groeneveld told reporters when asked when power supply talks would begin. The smelter will provide about 4,700 direct and indirect jobs and develop a skills for Malaysians in one of the country's least developed regions, Groeneveld said, adding that it could add 3 billion ringgit ($866 million) a year to gross domestic product. Sarawak's chief minister said the state had room for two smelters as more power supply became available, noting that a Malaysian-Chinese consortium had also submitted a proposal. "After we have some experience with Rio Tinto, we will be dealing with them," Abdul Taib told Reuters, referring to the proposes smelter by Malaysian tycoon Syed Mokhtar Al-Bukhary and a Chinese partner. He said additional power supply from new hydro-electric schemes could come onstream by 2013. Shares of Cahya Mata closed down 5.8 percent at 2.76 ringgit. Rio Tinto shares were up 2 percent at 32.87 sterling at 1012 GMT.