The new carbon bake, furnace 4, under construction at Boyne Smelter Alumina, Boyne Island.
The new carbon bake, furnace 4, under construction at Boyne Smelter Alumina, Boyne Island. Brenda Strong

Smelter sale no slight to value

BOYNE Smelter Limited might be up for sale, but that does not mean it shouldn't be considered an outstanding asset.

Patersons Securities Gladstone branch manager Liam Barry said Rio Tinto Alcan's surprise decision to divest the smelter should not be taken as an indication the facility is a sub-standard investment.

Mr Barry said Rio Tinto Alcan had incredible standards when it comes to profitability.

"My understanding is that (Rio Tinto) likes to see its top performing business units achieve at least a 40% rate of return," he said. "Just because the Smelter may not meet Rio Tinto's criteria, doesn't mean it isn't a great asset."

He also said the decision should not be seen as a blow to Gladstone's local economy.

"No doubt it will create a little uncertainty for employees and small business while this process unfolds," he said.

"However, the CEO of Rio, Tom Albanese, has said that they are in no rush to sell these assets and may well end up waiting until the economic climate improves."

Mr Barry said, from a stock market point of view, the past few years were recognised as a tough period for the aluminium industry.

Responding to the possibility Rio Tinto made the decision as a reaction to the carbon tax, he said it would only have been one of several factors.

"I think it would have had to have been a factor," he said.

"However, I also imagine that it was just one of many factors Rio Tinto looked at to arrive at its decision.

"In Rio's last third quarter operations review, they highlighted cost pressures were returning to the aluminium industry, which includes the effect of stronger currencies and the higher costs of caustic, coke and pitch."