CSR agrees to sell its Gove Alumina and Bauxite interest

CSR Limited and Billiton Aluminium Australia Pty Ltd have signed a non-binding heads of agreement for Billiton to offer to acquire CSR’s interest in the Gove alumina refinery and bauxite mine in the Northern Territory.

A due diligence process is under way. The parties expect that a binding offer willbe made by Billiton within the next two months.

Billiton Aluminium Australia is a 100% subsidiary of the UK mining and metals company Billiton PLC.

CSR hold sits interest in the Gove alumina refinery and bauxite mine joint venture through Gove Aluminium Ltd, of which CSR owns 70% and AMP Life Ltd 30%.

Gove Aluminium in turn has a 30% stake in the Gove joint venture, with the remaining 70% owned by Swiss Aluminium Australia Ltd, a subsidiary of Al group. CSR expects that the proposed transaction would be structured as asale of shares in Gove Aluminium.

Under the heads of agreement, AMP Life will be provided with a proposal on similar terms as offered to CSR.

The Gove joint venture contains pre-emptive rights for Swiss Aluminium Australia topurchase the CSR stake, during a six month period, on the same terms as offered by any potential buyers such as Billiton. Any binding offer by Billiton will be subject to those provisions.

CSR Managing Director Peter Kirby said that CSR had indicated last year that it intended to test the market for the sale of CSR’s aluminium interests.

"We said then that we would only sell if we judged the price to be satisfactory.We are satisfied that the terms proposed by Billiton make sense for CSR shareholders."

With regard to CSR’s interest in Tomago aluminium smelter, Mr Kirby said that, at this stage, no agreement had been reached to sell CSR’s interest.

"We have had discussions with a number of parties, and they are continuing. But we have yet to reach agreement on a proposal which we think is good for CSR shareholders," he said.

"We are not closing off any options to sell for fair value, but we will not be selling just for the sake of corporate tidiness. Retaining CSR’s investmentin the Tomago smelter remains an option.

"In the meantime, the business continues to perform very well boosted by the weaker Australian dollar and improved aluminium prices," said Mr Kirby.

The Gove joint venture produces around 1.8 million tonnes of alumina, of which Gove Aluminium’s share is about 540,000 tonnes. As well, the joint venture produces over 6 million tonnes of bauxite a year. Around 60% of Gove Aluminium’s alumina entitlement is sold on a long term basis to Gove Aluminium Finance Ltd, which holds CSR’s interest in the Tomago aluminium smelter in the Hunter Valley, New South Wales. This supply arrangement will be maintained under any sale by CSR of its Gove interest.

Billiton, with a market capitalisation of around A$13.3 billion, is listed on the London, Paris and Johannesburg stock exchanges. One of the world’s leading mining and metals businesses, the group has operations in Australia, Brazil, Canada, Colombia, Mozambique, South Africa and Surinam. Billiton ranks among the top four international producers of aluminium and alumina.