UPDATE 2-HIG to Buy Rio Tinto's French Alumina Plants
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Rio Tinto has received a binding offer from private equity group HIG for three French alumina plants that are part of an estimated $8 billion of aluminum assets put up for sale last year by the global miner to try to boost margins.
Rio Tinto said on Wednesday it had agreed a period of exclusivity with HIG and would respond to the offer after consulting unions.
Both Rio Tinto and Olivier Boyadjian, managing director of the private equity firm's French unit, declined to provide financial details.
Rio Tinto is selling the three plants - located in Gardanne, La Bathie and Beyrede in southern France - as part of a worldwide plan to scale back its activities in aluminum.
Rio Tinto, the world's third-largest diversified miner, signalled the retreat last October when it unveiled plans to sell 13 assets, only four years after buying aluminum giant Alcan in one of the sector's biggest ever deals.
Rio Tinto had told Reuters on Tuesday that it had seen "quite a lot" of trade and private equity interest in the aluminum assets. This marks a shift for the private equity industry, which has typically shied away from the capital intensive, long-dated mining sector.
Rio Tinto's speciality alumina business is the largest integrated supplier of non-metallurgical grade alumina, with the three plants in France and one at Teutschenthal in Germany. It employs 730 people.
Alumina, extracted from bauxite ore, is an ingredient in making aluminum but can also be used separately as an abrasive, due to its hardness.
Rio Tinto also operates two aluminum production plants in France, one in Dunkirk on the north coast and one at St Jean de Maurienne in the Alps, the historic heartland of the French aluminum industry.
Rio Tinto's aluminum business, Rio Tinto Alcan, told unions this month it was considering a sale of the St Jean de Maurienne plant as it faces a rise in energy costs when a 30-year-old electricity supply agreement with EDF expires in 2014.
The aluminum producer said it was continuing negotiations with EDF over a new contract.
Like the steel sector, aluminum production in Europe has come under threat from cheaper output elsewhere, notably in China, as well as its relatively small margins compared with other commodities like iron ore.
