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UPDATE 1-Rio Tinto agrees deal to sell Alcan Aluminium UK

Published 23/11/2016, 11:26 pm
© Reuters.  UPDATE 1-Rio Tinto agrees deal to sell Alcan Aluminium UK
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* Analysts say Rio's balance sheet strongest of its peers

* See logic in sale of low margin aluminium

* Liberty House says aiming for lower carbon manufacturing (Adds detail, quotes, analyst comment)

LONDON, Nov 23 (Reuters) - Rio Tinto RIO.AX RIO.L said on Wednesday it had agreed to sell Alcan Aluminium UK to two members of energy and metals group GFG Alliance for $410 million as part of an effort to bolster its balance sheet.

GFG Alliance's Liberty House Group will own and develop the aluminium business while another GFG member SIMEC will operate a related hydroelectric power plant near Ben Nevis in Scotland, Britain's highest mountain.

As part of a wave of asset sales across the mining industry, which is recovering from last year's commodities rout, Rio Tinto has agreed to more than $1.3 billion in divestments this year.

Since 2013, the total value of divestments announced or completed is $5.3 billion.

"This is a value-creating sale for Rio Tinto and represents another example of refining our portfolio to focus on our suite of tier one assets," Rio Tinto Aluminium Chief Executive Alf Barrios said.

He said there had been significant interest in the assets, but SIMEC was "committed to continuing operations at the smelter and working with the community on further economic development".

Sanjeev Gupta, executive chairman of Liberty House Group and of the GFG Alliance strategic board, said the deal fitted with its vision to develop a sustainable and competitive metals industry in Britain.

Gupta, who has been seeking to buy steel assets from Tata Steel TISC.NS with pledges to maintain jobs and keep open operations that have been loss-making, said the deal was "a springboard for wider manufacturing growth".

The agreement includes a payment on completion of 180 million pounds ($223.13 million) plus an additional payment of 150 million pounds not later than the end of February next year.

Rio said it expected the deal to close in mid December.

Analysts BMO Capital Markets said in a note the Scottish assets had very little value because of "low current margins" and the deal was positive for Rio, whose balance sheet remains the strongest of its peers.

Its share price was flat after the deal, roughly in line with the wider sector. .FTNMX1770

($1 = 0.8067 pounds)

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