Rio walks from plan to sell smelters

Mercury (Hobart) - - BUSINESS -

RIO Tinto has shelved plans to sell its Aus­tralian and New Zealand alu­minium busi­ness, ac­cord­ing to an­a­lysts briefed by the com­pany, and the min­ing gi­ant has warned of a deep hit to its earn­ings from more ex­pen­sive alu­minium raw ma­te­ri­als and coal.

Its plan to keep Pa­cific Alu­minium and the warn­ing on costs were de­liv­ered in presentations for in­vestors in North Amer­ica by alu­minium head Alf Bar­rios.

At its first-half re­sults in Au­gust, the miner said it would take a $320 mil­lion hit to earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion.

It was part of cost in­creases of $US500 mil­lion group-wide for raw ma­te­rial and en­ergy. That warn­ing prompted Rio shares to slide. “Raw ma­te­ri­als and en­ergy are lift­ing [the global] cost curve by 16 per cent from 2017,” Mr Bar­rios said. “Costs are ex­pected to stay el­e­vated in 2019.”

Rio fore­cast $US400 mil­lion of ex­tra caus­tic soda, coal tar pitch and coke costs over the full-year and $US100 mil­lion of in­creased coal costs. That in­cludes the $US229 mil­lion first-half cost hit pre­vi­ously flagged and $US50 mil­lion of first-half coal costs.

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