Rio Tinto / Dampier Salt is the world’s largest exporter of seaborne salt with annual production capacity of approximately 10 million tonnes. The company recently communicated the sale of the Lake MacLeod asset, one of its three production sites in Australia to privately-owned salt company Leichhardt Industrials Group for US$251 million. The completion of the sale is conditional on certain commercial and regulatory conditions being satisfied, but this is expected to occur by the end of the year.

Rio Tinto’s rationale for the sale

The company explained that the sale of Lake MacLeod will enable Dampier Salt to focus on enhancing operational efficiencies at its remaining two operations, while allowing the new owner of Lake MacLeod to maximize its potential.

Question marks

The explanation may surprise at first. Other than newcomer Leichhardt, Rio Tinto has extended experience as salt producer in Australia and the company certainly has the financial strength to maximize the potential of MacLeod. The sale is also surprising, given that companies normally try to increase market share, and synergies with acquisitions, rather than selling assets.

Some Background

A reason for the divestment could be that Rio Tinto doesn’t see enough expansion potential for both sites – Dampier, and MacLeod. Australia hasn’t been able to grow its exports in-line with the expansion of the Asian, and particularly the Chinese chlor-alkali market in the past decade.

Sources: GTT, China National Statistics

Planned capacity additions vs growth potential

Additional millions of tons of production capacity are currently under way in Australia at different stages of development by BCI, Leichhardt, and K+S. Rio Tinto appears to have come to the conclusion, that its two remaining assets, including expansion potential at the Dampier site, are sufficient to satisfy future demand in the most efficient way.


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