NEW YORK ( The Deal) -- Anglo-Australian mining company Rio Tinto Group (RIO) on Thursday abandoned the planned sale of Pacific Aluminium almost two years after grouping businesses that came with its troubled $38 billion purchase of Alcan ready for disposal.
Announcing first-half results that included an 18% decline in underlining earnings, to $4.2 billion, Rio Tinto CEO Sam Walsh indicated the assets failed to attract a high enough price.
"Following a comprehensive review we have ... determined that the divestment of Pacific Aluminium for value is not possible in the current environment and it will be reintegrated into the Rio Tinto Alcan group," he said in a statement. "Our global aluminium business is one of the best performing in a challenging industry. We continue to make good progress to transform our businesses through divesting or closing noncore assets, business improvement and targeted investment. But we need to do more to improve performance and returns."
Rio Tinto in October 2011 bundled six Australian and New Zealand aluminum refining and smelting operations into Pacific Aluminium, in preparation for their sale. It also put seven refinery and smelting operations in the U.S., U.K., France and Germany on the block. Analysts at the time predicted the aluminum disposals could raise $7 billion or more.The decision to shelve the Pacific Aluminium sale comes after Rio Tinto in June abandoned a 15-month search for an exit from its diamond business, declaring that it will hold on to an operation it had previously declared too small. Both moves highlight the difficulty inherent in Walsh's strategy of swinging noncore disposals at a time when many commodities' prices are in the doldrums because of slowing Chinese growth. London-based Rio Tinto's first-half results showed prices for all commodities had slipped save for iron ore. Walsh replaced Tom Albanese as chief executive at the start of the year after the former chief acknowledged the company had made mistakes over acquisitions during the previous decade. Debt associated with the deals, particularly the Alcan purchase, had briefly threatened the existence of the world's No. 2 mining group, after BHP Billiton (BHP).