Rio Tinto sale helps pay off its Alcan debt

MINING giant Rio Tinto boosted its cash position yesterday, selling its Americas food packaging company to US group Bemis $1.2bn (&pound;740m). Rio said that $200m of the sale proceeds may be in the form of Bemis shares.<br />Rio, which last week raised $15.2bn through a massively discounted rights issue, is looking to slash the debt it took on in 2007 through its acquisition of $38.1bn Canadian aluminium group Alcan.<br /><br />&ldquo;The Alcan acquisition was much criticised at the time and with hindsight was made at the peak of the market,&rdquo; Barclays Wealth&rsquo;s Thuy Quynh Dang said.<br /><br />Rio is racing to cut its net debt by $10bn by the end of 2009.<br /><br />Some of the cash was meant to be paid off soon after the Alcan acquisition, by selling off the company&rsquo;s assets fast, but plans were halted by the worldwide recession.<br /><br />Rio said yesterday the sale of the arm was the first &ldquo;significant step in reducing the asset portfolio acquired with Alcan.&rdquo;<br /><br />&ldquo;The sale won&rsquo;t make a huge dent in Rio&rsquo;s debt, but a billion here, a billion there, soon we&rsquo;re talking real money,&rdquo; Edison Investment&rsquo;s Charlie Gibson said. &ldquo;The sale also allows Rio to focus on its more core assets,&rdquo; he added. The mining giant added that it is still planning to sell the remainder of Alcan Packaging, as well as Alcan Engineered Products.<br /><br />In February, the dual-listed company announced plans to tie-up with its major shareholder Chinalco, in a deal which would have seen Rio receive a $19.5bn investment from the Chinese state-owned company.<br /><br />Chinalco would have doubled its stake in Rio to 18 per cent. But last month, after investors threatened to vote the deal down, Rio&rsquo;s chief executive Tom Albanese jilted the Chinese group in favour of a joint venture with larger rival BHP Billiton, and announced plans to raise cash from shareholders.<br /><br />Rio shares closed down 7 per cent in London at 1,884p.