MercoPress. South Atlantic News Agency

Rio Tinto selling assets to trim debt burden

The Anglo Australian mining giant bought Alcan when metal prices were at record highs

Rio Tinto has agreed to sell four business units of its Alcan aluminium subsidiary for 2 billion US dollars as it seeks to trim its debt burden further. The Anglo-Australian mining giant is selling the four packaging businesses to Australian group Amcor.

Amcor, the world's largest maker of plastic soft-drink bottles said the operation is geared to expand its business in Europe and emerging economies.

The company will acquire Alcan Packaging's European and Asian food units, as well as its global pharmaceutical and tobacco businesses. Amcor plans to fund the acquisitions through an offering of shares and establishing a committed bank facility.

Rio Tinto, on of the world’s leading mining corporations only bought Alcan in 2007 but built up significant debts to help fund the 38 billion US dollars deal.

The announcement comes a month after Rio said it had agreed to sell Alcan's US food packaging business for 1.2 billion US dollars to US company Bemis.

The total raised by Rio through asset sales in the past 18 months is 6.6 billion, further strengthening the miner's balance sheet helping ease market concerns about Rio's debt.

Analysts said the problem for Rio was that it paid too much for Alcan, buying the firm when global metal prices were at record highs.

“Now is the right times in the economic cycle to be making acquisitions, as asset values are substantially lower than they have been for many years,” said Amcor chief executive Ken MacKenzie.

Rio said Amcor's offer was good for all its shareholders.

The Alcan divisions being sold employ about 14.000 staff at 80 locations in 28 countries. The sale is still dependant upon regulatory approval in the US and Europe.

Rio raised 15.2 billion in July through a share issue in order to bolster its finances. The company had launched the rights issue after it pulled out of a deal that would have seen it receive a 19.5 billion investment from China's Chinalco.

However, Rio scrapped the Chinalco deal in favour of a tie-up with rival giant BHP Billiton.