Rio's cancellation of the divestment plans for Pacific Aluminum not to impact its stakeholders

Rio Tinto's decision to call off the divestment plans for its Pacific Aluminium unit will not impact stakeholders of Australian Boyne Aluminium Smelters and the New Zealand Aluminium Smelters, a spokesman for Sumitomo Chemical, which has stakes in both companies, said Friday.

"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," the miner said in its results statement Thursday.

"This [calling off the divestment plans] is a move within the Rio Tinto group and will not have any effect on the stakeholders," the Sumitomo Chemical spokesman said. Sumitomo owns 20.64% of New Zealand Aluminium Smelters and 2.46% of the Boyne Smelters.

"Since the 2011 decision to divest the Pacific facilities, we were concerned that we may have a partner unfamiliar with the aluminum smelting operations," said another stakeholder source. With the calling off of divestment, his concerns were partly put to rest, but he did not rule out possibility of sale of some assets.

The source noted that "while Rio Tinto no longer seeks divestment options openly, the possibility of Rio Tinto divesting some of the assets remains."

One Japanese end-user, who buys from one of the Pacific Aluminium smelters, concurred: "Rio Tinto said divestment is not possible in the current environment and the LME aluminum prices are low. What if the LME aluminum prices rise? The company might weigh new options."

The end-user also warned that the move to divest, and to reintegrate Pacific Aluminium, is also creating an impression to end-users that the company is not seeking long-term relationships with customers. Rio Tinto spokesman Bruce Tobin said the reintegration, which will take place in the second half of 2013, has started with immediate effect following its announcement.

"Planning and work has already started so we can reintegrate Pacific Aluminium into Rio Tinto Alcan. It had become clear that we couldn't deliver a value-driven divestment of Pacific Aluminium in the current market and we are bringing the assets back into our aluminium product group so we can focus on the future of our aluminium assets as a whole," he said.

In October 2011, Rio Tinto announced it would restructure its worldwide aluminum business and said interests in a number of its Australian and New Zealand assets -- the Gove bauxite mine and alumina refinery, the Boyne Smelters and associated Gladstone power station, the Tomago and Bell Bay smelters in Australia; and the New Zealand Aluminium Smelters -- would be transferred into a new business unit called Pacific Aluminium.