Xstrata to sell aluminum assets for US$1.15 billion

Xstrata to sell aluminum assets for US$1.15 billion

Xstrata plc, the fourth-largest copper and nickel producer in the world, has agreed to sell aluminium plants and a bauxite mine to New York-based Apollo Management LP for US$1.15 billion as it focuses on more profitable commodities.

The operations in the US and Jamaica were acquired by Switzerland-based Xstrata in 2006 when it bought Canada`s Falconbridge Ltd for US$17 billion, and is known as Noranda Aluminium.

Apollo, run by billionaire Leon Black, will get an aluminium smelter in Tennessee and three rolling mills elsewhere in the US. It will also acquire a 50% stake in the Gramercy refinery in Louisiana and the St Ann bauxite mine in Jamaica.

The agreed sale follows a review of options, including expanding the aluminium unit, Xstrata added in the statement on Wednesday.

“These assets do not provide Xstrata with the necessary scale or upstream exposure to represent a suitable entry point from which to build a world-class aluminium business,” Xstrata chief executive Mick Davis said.

The price of aluminium has dropped behind copper and nickel due to increasing supply from China, the world`s largest producer of the metal.

Shares of Xstrata gained £0.37 (1.3%) to £27.94 in London on the announcement.
The stock has risen 55% in the past 12 months, valuing the company at £27.1 billion (US$53.6 billion).

“It`s a small business in the global scheme of things,” Paul McTaggart, an analyst at HSBC Holdings plc in London said in an interview. He added: “It`s not a bad price, and people had anticipated it.”

Xstrata hasn`t ruled out acquiring aluminium operations in the future, company spokeswoman Claire Divver told Bloomberg.

The company`s acquisition in aluminium will provide “stability” in revenues as the industry is less “volatile” than other industrial metals, McTaggart said.

The transaction is subject to regulatory approval and is expected to be completed in the second quarter this year, Xstrata said.

Information from: www.mining-journal.com

Share this post