Time’s right for Portland smelter sale with buyer sniffing around

It is understood a potential buyer approached the federal government before the election was called to test the waters on support for a potential bid for the smelter.

It has been a year since Victoria’s Portland aluminium smelter negotiated a job-saving power deal that will keep the plant operating until 2026, and rumours are again circulating that Portland is back in play.

It is understood a potential buyer approached the federal government before the election was called to test the waters on support for a potential bid for the smelter, operated by Alcoa of Australia along with minority owners CITIC and Marubeni (22.5 per cent each).

It is not clear whether the approach was unsolicited or whether Alcoa is actively preparing Portland for a sale, given the amount of arm-twisting needed to get the federal and state governments on board for last year’s $160m support package for the smelter.

But, to paraphrase one source close to the aluminium giant, if a credible buyer emerged Portland would be for sale any day of the week.

It is unclear who made the approach, but both private equity plays and resources giant Glencore are said to have expressed an interest in running a ruler over the operation – although, to be fair, if there’s an asset in the world where Glencore wouldn’t kick the tyres if invited, Data Room is yet to hear about it.

A separate source suggested that Clive Palmer’s Mineralogy was also sniffing around for new assets.

But even though Mineralogy recently signalled it was looking to reopen Townsville’s Yabulu nickel smelter, the disastrous circumstances surrounding its closure would probably make any seller of industrial assets wary of a transaction with the Queensland businessman – not to mention the likely response from governments.

Still, with a power deal locked away, aluminium prices still hovering above $US3200 a tonne on the London Metal Exchange and a restart of mothballed production lines under way at Portland, Alcoa is unlikely to find many better times to try to get a sale away.

Curiously enough, though, Portland’s progress following the new power deal received nary a mention in last week’s quarterly results presentation by Alcoa, and sources say recent swings in the National Energy Market’s wholesale power prices haven’t been particularly helpful to the smelter.

It is unlikely that Alcoa would consider selling much else from its Australian portfolio – except perhaps the Kwinana alumina refinery in Western Australia, also a perennial struggler – given the rest of its assets in the state have made money right round the price cycle.