Sanjeev Gupta Considers Buying Rio Tinto Aluminium Assets

Rio Tinto is in talks with British billionaire Sanjeev Gupta, who this year purchased Arrium and its Whyalla steelworks from administrators, to buy Rio’s Australian and New Zealand aluminium assets.

It is understood Mr Gupta, who is living in Sydney, plans to visit some of the assets this week to decide whether to make a bid.

The assets include stakes in the Boyne aluminium smelter at Gladstone, the Tomago smelter in the Hunter Valley and the Bell Bay smelter in Tasmania.

The company’s Pacific Aluminium division, which analysts have valued at up to $US1 billion, also owns the Gladstone power station and a majority stake in the New Zealand Aluminium Smelters business that includes the country’s only aluminium smelter at Tiwai Point in Southland.

Rio also owns two alumina refineries in Queensland — QAL and Yarwun — and bauxite mines at Weipa and Gove, but these are not part of discussions.

In 2013, Rio made plans to float its Australian and New Zealand refineries and smelters as Pacific Aluminium, under current Newcrest boss Sandeep Biswas, but abandoned the plans when it did not look like achieving good value.

So the assets have been unofficially up for sale for a while and a lot of prospective buyers have looked at them.

But under Rio chief executive Jean-Sebastien Jacques there is a stronger intent to sell, and a recent turnaround in aluminium prices to near six-year highs could help drive a higher price.

On the flip side, the most expensive input in aluminium smelting is the cost of electricity. This means that whoever buys the assets will have to contend with uncertain east coast power costs and reliability.

The Australian’s DataRoom column in August reported that Glencore and US company Century Aluminium were circling the assets. The process is being run by Deutsche Bank and information memorandums on the assets were expected this month, DataRoom said.

Mr Gupta bought Arrium in July through the GFG Alliance his company Liberty has with companies owned by his father, Indian tycoon Parduman Gupta.