Rio Tinto may partner in Utkal Alumina

Rio Tinto, the Anglo-Australian mining major acquiring Canadian aluminium giant Alcan, is likely to be the joint venture partner of the Aditya Birla Group in Utkal Alumina International, which is developing a bauxite mine and a new alumina refinery in Orissa.

Alcan had earlier decided to pull out of Utkal Alumina on the grounds that it had limited powers to participate in the key decisions of the company and had set June as the deadline for divesting its stake.

But Alcan's prospective owner Rio Tinto, which had made a $38 billion bid for Alcan, would like to hold on to the 45 per cent stake in Utkal, sources familiar with the developments said.

When contacted, a Rio Tinto spokesman said: "We have just made the offer. It is yet to be ratified by shareholders. We do not want to comment on individual projects now; once we get shareholders' approval, we will have a look at what Alcan had."

"It is still early stages," the spokesperson added. An e-mail query to Alcan remained unanswered.

The sources said Rio Tinto's aggressive bid for Alcan was heavily dependent on the future business of the company from China and India.

Rio Tinto's chief executive, Tom Albanese, recently said the creation of the world's largest aluminium company, to be called Rio Tinto Alcan, would benefit from rapid economic growth of China and India. The acquisition still needs to be approved by regulators.

India's growth was five years behind China's but gross domestic product in both countries was expected to increase at almost 9 per cent until 2015, Albanese had said.

Utkal was established in 1992 as a joint venture between Hindalco, Alcan and Hydro Norsk. Indal, now a part of Hindalco, held 20 per cent, Alcan 35 per cent and Norsk Hydro 45 per cent. Norsk Hydro later sold its stake to the other two partners.

Rio Tinto had been looking for a suitable target in India for quite some time. It had shown initial interest in acquiring iron ore exporter Sesa Goa from Japan's second largest trading company, Mitsui, but did not participate in the bidding process.

Rio Tinto's biggest rival, BHP Billiton, is finalising plans to debut in India. It is expected to pick up 51 per cent in Ashapura Minechem's alumina project in Orissa. Ashapura will hold the remaining 49 per cent in the Rs 2,500-crore aluminium refinery project.

Utkal was established in 1992 as a joint venture between Hindalco, Alcan and Hydro Norsk. Indal, now a part of Hindalco, held 20 per cent; Alcan 35 per cent and Norsk Hydro 45 per cent. Norsk Hydro later sold its stake to the other two partners.

The Utkal project, which is in an engineering phase, has been marred with controversy with local residents opposing its construction on the plea that it would displace three villages and at least 200 families. Local critics have estimated that as many as 22,000 people could be affected.

In December 2000, there was a clash between villagers and police at Maikanch over land acquisition. Three tribals were killed in the police firing that followed.

Dick Evans, Alcan's president and CEO, was confronted by protesters at the company's annual general meeting last year, asking Alcan to pull out of the project.

A resolution calling on Alcan to sponsor an independent committee to assess the project's impact on the community was defeated.