South32 'targets first acquisition'

Speculation is mounting that South32, the diversified metals company spun out of global resources group BHP Billiton, could be planning its first acquisition - Rio Tinto's Pacific Aluminium assets.

South32 CEO Graham Kerr said ahead of its stand-alone listing in the UK, Australia and SA last month that it would be open to making value-adding acquisitions.

South32 has only $674m of net debt and access to $1.5bn of credit lines.

Rio Tinto is expected to seek $1bn to $1.2bn for Pacific Aluminium.

In a morning note, Investec's global mining team, citing media reports, said South32 was seen as the most credible suitor for Pacific Aluminium, for which Credit Suisse was seeking buyers.

"Rio Tinto is reviving the sale of Pacific Aluminium two years after it was shelved amid signs that an upturn in the aluminium market could attract a high enough price for the subsidiary," it said.

Rio Tinto declined to comment on market rumours.

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