World’s second largest miner Rio Tinto (ASX, LON:RIO) is selling an aluminum smelter and hydro-electric power plants in Scotland to two affiliates of energy and metals group GFG Alliance for $410 million (£330m), as part of its efforts to cut debt.
The deal comprises Rio’s Alcan Aluminium UK Ltd. unit, which includes the operating aluminum smelter at Fort William, the hydroelectric facilities at Kinlochleven and Lochaber, as well as all associated land.
“This is a value-creating sale for Rio Tinto and represents another example of refining our portfolio to focus on our suite of tier-one assets,” Rio’s aluminum chief executive Alf Barrios said in a statement.
The good news for locals is that the buyers are “committed to continuing operations at the smelter and working with the community on further economic development,” Barrios noted.
SIMEC and Liberty House, two members of international industrials group GFG Alliance, said their investment in Lochaber was being backed by the Scottish government through a variety of business support mechanisms, in particular through support for a Liberty contract to purchase power from the hydro-electric plants.
The agreement includes a payment on completion of 180 million pounds plus an additional payment of 150 million pounds not later than the end of February 2017.
The sale doesn’t come as a surprise to anyone, as Rio Tinto announced earlier this year it a major management reshuffle and division reorganization aimed to streamline operations and further cut its gross debt by $3 billion.
So far this year, the company has agreed to offload more than $1.3 billion in assets, bringing the total value of divestments announced or completed to $5.3 billion since January 2013.
Today’s deal is expected to close in mid December.