After 10 months of auction, Rio Tinto sells Alcan Aluminium to SIMEC for $555.8 million

Rio Tinto (ASX: RIO) just sold its Alcan Aluminium UK business for US$55.8 million (A$753.3 million) to SIMEC, a commodity group in UK. The sale, which includes a smelter at Lochaber, Scotland, hydro-electric plants and land, end a 10-month auction after Rio placed it on the market in January.

Alf Barrios, Rio Tinto aluminium chief executive, says the sale created value for the miner as the company refines its portfolio to focus on its tier one assets. It is also part of Rio’s priority to ensure a long-term sustainable future for Lochaber and economic benefits for Fort William where the smelter in located, The Australian reports.

SIMEC, which commits to continue the smelter and work with the Fort William community on further economic development, would pay Rio Tinto in two tranches. The first £180 million (A$303.1 million) would be upon signing of sale documents in mid-December and the remaining £150 million (A$252.7 million) by Feb 28, 2017.

Besides selling Alcan, Rio Tinto is also aiming to have US$5 billion (A$6.8 billion) fresh cash flow over the next five years through a new productivity drive, The Australian reports. The initiative focuses on generating cash and implementing capital discipline by placing higher priority on value over volume, Jean-Sebastien Jacque, Rio Tinto chief executive, said at the company’s investor day in Sydney.

He also reaffirmed Rio Tinto’s iron ore production targets amid rising price of the key-steelmaking ingredient. He set shipment guidance of Pilbara at 330-340 million tonnes of the commodity in 2017. Jacque says the giant miner expects capital expenditure in 2016 to be cut to less than US$3.5 billion (A$4.7 billion) from US$4 billion (A$5.4 billion).