Demerger plan could net Rio Tinto £650m

Miner considers loading debt on to Australian spin-off company

Rio Tinto looks set to earn itself a £650m payday by loading debt onto its Antipodean aluminium smelters business.

The FTSE 100 miner has been reviewing the spin-off of the assets, which are run under the "Pacific Aluminium" banner, since October. Rio's aluminium operations have hurt the miner's finances in recent years.

Rio had hoped to raise money through selling shares in the subsidiary through a flotation, but it is thought that advisers Credit Suisse and Morgan Stanley have cooled on that idea.

Though economic conditions make a separate listing difficult, Rio Tinto is warming to a plan that would see a demerger of the business. This would result in a separate company quoted in Australia, with possibly a secondary listing in London, that would be owned by Rio's existing shareholders.

Though Rio chief executive Tom Albanese would not raise funds directly this way, he could load up to Aus$1bn (£650m) of debt onto Pacific Aluminium. This would reduce the value of the demerged business from an estimated Aus$5bn to Aus$4bn, but the debt would be used to pay Rio a one-off Aus$1bn special dividend.

It is thought that Rio would look for the demerger to happen in September this year. A source close to the company said: "Aus$1bn would be at the top end of what could be put on to Pacific Aluminium. But a demerger that creates a new public company is the base case, probably right at the end of the third quarter."

Falls in the price of aluminium has been the bane of Rio since it bought Canada's Alcan for US$38.1bn (£24bn) in 2007; billions have been written off as a result of the deal's poor timing. A spin-off of Pacific Aluminium, which includes a refinery and an unprofitable bauxite mine as well as smelters, would help clean-up the division.

A Rio spokeswoman said: "We are not in a hurry to divest these assets. It is maybe a case of waiting until the economic climate improves."

Mr Albanese might well be asked to update shareholders on these plans at the company's annual meeting this week. They will also be hoping for news on Rio's diamond business, which the board put up for review last month. Great rival BHP Billiton is also mulling a sale of its diamond operations, but potential buyers for either are thought to be few and far between. One possibility might be to merge the two diamond business, creating an industry champion.

Also holding an AGM this week is another great name in mining, Anglo American. This will give its board the opportunity to assess the mood of shareholders towards chief executive Cynthia Carroll.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border