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Century Aluminum Buying Rio Tinto Smelter

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Even as it contemplates shutting down its largest aluminum smelter in the United States, Century Aluminum (NASDAQ: CENX  ) says it's planning to buy another smelter entirely. On Monday, Century announced that it's signed a definitive agreement to buy Rio Tinto's (NYSE: RIO  ) Sebree aluminum smelter in Henderson County, Ky.

Sebree, which employs 500 souls and has an annual production capacity of 205,000 metric tons, would become Century's largest wholly owned U.S. smelter if the company proceeds with plans to shutter its Hawesville, Ky., plant (or its second-largest if Hawesville remains open). And in this regard, Century is starting to sound less like it actually intends to shutter Hawesville after all.

Says CEO Michael Bless: "We believe Sebree, like Hawesville, is globally competitive in every area other than the cost of power ... and we hope that the tentative agreement we have reached for Hawesville will be the first step toward obtaining market priced power."

As for Sebree, Century says it will be paying $61 million cash, a price below Sebree's own working capital. Additionally, Rio Tinto will retain "all historical environmental liabilities of the Sebree smelter and has agreed to fully fund the pension plan being assumed by Century's subsidiary at closing." So in a very real sense, Rio Tinto is practically giving the company away.

Unsurprisingly, therefore, Century Aluminum shares leapt on the news -- rising 12.2% in Monday trading to close at $7.56.

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Rich Smith

I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.

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Related Tickers

5/5/2016 12:27 PM
CENX $7.53 Down -0.21 -2.71%
Century Aluminum C… CAPS Rating: **
RIO $30.53 Down -0.02 -0.07%
Rio Tinto plc (ADR… CAPS Rating: ***