Rio Tinto Says Won't Rush To Exit Aluminum Assets

Nov 28, 2011 (Dow Jones) -- Rio Tinto PLC (RIO) won't rush to exit about a dozen targeted aluminum assets, and will consider options including a trade sale or initial public offering, the Anglo-Australian company's chief financial officer said Monday.

The key to identifying the assets as non-core was to remove them from the Rio Tinto Alcan portfolio, allowing executives to focus on improving margins, Guy Elliott told investors during a seminar webcast from Sydney.

"We're keen to move...but not at any price," Elliott said, adding the environment for a sale wasn't "benign" at the moment.

Rio said the short-term outlook remains challenging for the aluminum business as the industry experiences higher input costs and lower prices, which are currently well below the industry's marginal cost of production. At current prices, Rio Tinto Alcan's underlying earnings are expected to be around break-even in the second half of 2011, the company said.

However, it said the medium- to long-term fundamentals for aluminum remain strong, with demand forecast to grow almost 6% a year to 2020 and supply expected to remain in balance. It said the cost curve is expected to steepen, largely due to rising energy costs, which will benefit lower-cost aluminum producers.

Rio in October said it would streamline its aluminum division, and would divest 13 assets. Earlier this month it said it planned to close its Lynemouth aluminum smelter in England.