Rio Tinto Takes Liberty Group To Arbitration Over Final Payment On Dunkerque Smelter Deal

Rio Tinto Takes Liberty Group To Arbitration Over Final Payment On Dunkerque Smelter Deal

Anglo-Australian mining giant Rio Tinto Group is taking GFG Alliance to arbitration after the firm said Sanjeev Gupta’s company has yet to make the final payment for the purchase of Rio Tinto’s Dunkerque aluminium smelter.

“Rio Tinto confirms it has triggered an arbitration process in relation to the sale of the Dunkerque aluminium smelter, France, to Liberty House,” said Rio Tinto in a statement this weekend.

“The arbitration relates to non-payment of customary post-closure adjustments, including working capital, which was agreed by both parties in the sale and purchase agreement.”

According to the Financial Times, Gupta’s Liberty House still owes US$50 million of the US$500 million purchase price for the French smelter.

However, GFG went on record disputing that figure, saying the “very successful” transaction’s remaining payment is “significantly smaller” than stated by Rio Tinto.

“As is usual practice in sizeable mergers and acquisitions, there is a mechanism in place post-completion to settle the final consideration to be paid to the vendor net of working capital, accounting and other issues.”

“This system is ongoing with the vendor as part of the normal process, and differences are being reconciled,” the statement from GFG continued. “This smelter is operating on budget, it is highly profitable and cash generative despite poor aluminium prices.”

The Dunkerque aluminium smelter is among the largest smelters in Europe. First commissioned in 1991 by Pechiney, the smelter was built as a more-efficient replacement for the Noguères and Rioupéroux aluminium smelters and their respective capacities of 114 thousand and 24 thousand metric tons per annum.

The massive smelter occupies 161 acres of land and boasts a production capacity of 284 thousand metric tons per annum on its two potlines, most of which consists of aluminium slab. The plant boasts a workforce of 575 workers and is powered by a pair of nuclear reactors.