Friday, 10 August, 2007

Mining Journal Online

Rio Tinto Group, seeking to buy Alcan Inc for US$38.1 billion to become the world`s largest aluminium producer, might sell Palabora Mining Co to fund the purchase, according to Citigroup Inc.

Palabora, the operator of South Africa`s largest copper mine, and the Northparkes copper and gold mine in Australia are “small, limited-growth operations that could be sold to an eager junior,” Citigroup analysts Heath Jansen, Clarke Wilkins and John Hill wrote in a report on Thursday.

Rio Tinto, led by chief executive officer Tom Albanese, is considering at least $10 billion of asset sales to finance the purchase of Alcan. Selling the aluminium producer`s packaging unit would probably raise about US$5 billion, leaving the remainder to come from London-based Rio`s existing assets, the analysts said.

Rio Tinto owns 80% of Northparkes, with the remaining 20% held by Tokyo-based Sumitomo Corp and Sumitomo Metal Mining Co. The mine produces about 80,000 t of copper each year and 95,000 oz of gold, the bank said. Rio Tinto also has a 58% stake in Palabora, whose production costs are “high”, Citigroup said.

Phalabora, South Africa-based Palabora`s first-half profit rose 48% from a year ago to R382 million (US$53.8 million). The stock has gained 92% in the past 12 months, valuing the company at R3.63 billion (US$506 million).

Rio Tinto also may sell its uranium assets, the Citigroup analysts said.

The value to the company of selling them may be “significantly stronger” than holding them, they wrote.

Albanese said on August 5 that Rio Tinto plans to expand its investments in uranium, rather than sell them. Rio controls Energy Resources of Australia Ltd, producer of more than 10% of the world`s uranium, which is studying an extension of the life of the Ranger mine in the Northern Territory.