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Rio Tinto faces $10.8 Bn write down over Alcan purchase

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This topic contains 2 replies, has 1 voice, and was last updated by  Charles Randall 14 years, 2 months ago.

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  • #3291

    Charles Randall

    Rio Tinto faces a $10.8bn write-down over its Alcan acquisition

    By Jamie Freed    December 3, 2008

    THE market is starting to factor in the prospect of Rio Tinto taking a $US7 billion ($A10.8 billion) write-down on its $US38 billion acquisition of Canadian aluminum producer Alcan when it releases its full-year results in February.
    After BHP Billiton last week admitted it would take a $US2.1 billion impairment on its $US2.8 billion Ravensthorpe nickel laterite operation, and a $US450 million hit on fees associated with its aborted bid for Rio, the focus has switched to whether the hefty price of the Alcan deal remains justified in accounting terms.
    Rio’s chairman, Paul Skinner, last week said: “Every year we need to go through a review of our asset valuations at the end of the period. I wouldn’t want to signal any intention to change the holding values of any assets in our portfolio today.”
    As Merrill Lynch analyst Vicky Binns noted, the forward price of aluminium was stronger now than when Rio announced its Alcan purchase. But she said the downstream assets Rio has so far been unable to sell – packaging and engineered products – were at risk of a possible write-down.
    Credit Suisse yesterday valued each of those Alcan downstream divisions at $US2.5 billion, which is about half the value Rio was expected to achieve from the sales when it announced the Alcan deal.
    UBS and Credit Suisse said a $US7 billion write-down on the Alcan assets was a possibility.
    UBS analyst Glyn Lawcock noted that several of Rio’s growth projects, including the $US1.8 billion expansion of its Yarwun refinery in Queensland, were at risk of being delayed.
    Rio has cancelled work on a housing village associated with the Yarwun expansion, raising fears the project will be placed on hold. But Rio spokeswoman Diane Collier said the expansion was continuing and the housing had been cancelled because 80 per cent of its workforce would come from the Gladstone area.

  • #6422

    Charles Randall

    Here is update on Rio Tinto &  Ouch #2.
    This may make things may get tougher for the refinery green anode producers & calcined coke market as well.

  • #6421

    Charles Randall

    <Looks like the Alcan Yarwun Project survived – which is good for Aluminum section. – CER>
    Rio Tinto slashes more jobs all the way to Mongolia
    Article from: Hearld Sun     By Tony Grant-Taylor
    December 03, 2008 12:00am

    RIO Tinto, which outlined a multi-billion-dollar capital expansion plan as it resisted BHP Billiton’s takeover overtures, yesterday continued to slash proposed spending in light of its huge debt and sagging world economic growth.
    With BHP having canned the bid and commodity prices plunging, Rio announced a major staff cut at its massive Mongolian copper joint venture.
    It also effectively tossed its planned $1.1 billion expansion of its Kestrel mine near Emerald in Queensland up in the air, though the development of its Clermont mine, to replace Blair Athol, is apparently on track.
    And it cancelled a contract associated with its $1.8 billion expansion of its Yarwun alumina refinery near Gladstone.
    Oyu Tolgoi, the Mongolian copper-gold joint venture between Rio and Canada’s Ivanhoe Mines, announced it had cut about 250 jobs, representing around 40 per cent of its workforce, because of the global financial crisis and collapse in metal prices.
    “In light of the global financial crisis and collapse of international prices for metals such as copper the Oyu Tolgoi project – which was projected to produce 440,000 tonnes of copper and 320,000 ounces of gold by 2011 – is implementing cost-saving measures which have necessitated some reductions in the workforce,” Oyu Tolgoi managing director Keith Marshall said.
    Meanwhile, a Rio Tinto Coal spokesman – who only a couple of weeks ago said its $1.1 billion Kestrel expansion and the group’s $860 million Clermont open-cut mine development were full steam ahead – yesterday had become constrained by Rio’s corporate line that all near-term expansion plans are under review.
    A Rio Tinto Alcan spokeswoman said news that Rio had cancelled a contract with Mac Services for a 300-unit village to house workers on its Yarwun project did not mean it had been put on the backburner.
    Rather, the cancellation suggested a silver lining was appearing from the reassessment of previously ambitious resource development plans with labour easier to find.
    Rio had managed to recruit 80 per cent of the workforce it needed for the project from the Gladstone region, the spokeswoman said.
    It would therefore not need to import a lot of workers, something it obviously previously thought would be necessary because of a predicted continuing shortage of skilled workers across much of central Queensland.
    “Based on the fact that we currently employ more than 80 per cent of our workforce out of the Gladstone area, our need for that employment village is not as critical as we had thought,” she said.
    But the news who pushed Mac Services shares 17 per cent lower to $1.075.
    Mac Services said it has agreed with Rio to terminate the village development agreement and the two companies would work to determine fair payment for work completed so far.
    It still expected to have about 5400 rooms in resource provinces across the country by June 30 and said its existing villages continued to perform strongly in line with expectations.

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