Gencor to shell out dollars 1.2bn for metals: Assets in 15 countries acquired by S African group

ROYAL Dutch Shell has agreed to sell most of its metals division to Gencor, the South African mining group, for dollars 1.2bn.

The deal will enable Shell to invest more heavily in its oil activities, particularly Far Eastern refineries, and provide an international expansion opportunity outside South Africa for Gencor.

Although the deal was widely foreshadowed, shares in Shell fell by 10p to 732p after the company warned that the disposal would mean an after-tax charge against profits of dollars 170m in its second quarter figures. But Shell also said it expected at least to recoup this shortfall with the sale later this year of its remaining metals assets.

The current deal involves Shell's Billiton assets in 15 countries. They include aluminium refining joint ventures in Brazil, Australia and Surinam and aluminium smelting in Brazil.

Also involved are mining activities in nine countries in bauxite, nickel, gold, zinc and lead, a portfolio of exploration rights, a global metals marketing and trading company and a Netherlands-based services company.

Later this year Shell hopes to complete the sale of its interest in the Boddington gold joint venture in Australia by means of a public flotation and to auction its interest in the Collahuasi copper joint venture in Chile.

A depressed price for aluminium, which makes up 60 per cent of sales, pushed Billiton into losses in 1992 and 1993, according to an accountants' report by KPMG for Gencor shareholders.

In 1989, when aluminium averaged dollars 1,955 a tonne, Billiton made pre-tax profits of dollars 346m but as prices slipped to less than dollars 1,200 the operations made losses of dollars 17m and dollars 3m in the past two years respectively.

On a pro forma basis, including Billiton, Gencor's earnings would have been depressed by 9 per cent in 1993.