Final Thoughts
February 13, 2026
A closer look at the Rio Tinto, Chalco deal in Brazil
Written by Greg Wittbecker
A deal between Rio Tinto and Aluminum Corporation of China Limited (Chalco) to acquire Votorantim’s 68.6% interest in Companhia Brasileira de Alumínio (CBA) in Brazil has left some people scratching their heads.
The two companies announced Jan. 30 they would form a joint venture to buy the controlling interest for $903 million.
Let’s unpack this story from both tactical and strategic perspectives.
Tactical considerations: It is cheap capacity
- The joint venture will be required under Brazilian law to tender for the remaining 31.4% of outstanding shares, bringing the total cost of the enterprise to about $1.9 billion. They are getting a substantial portfolio for that investment:
- A network of 21 hydroelectric dams with installed capacity of 1.6 gigawatts (GW) capacity. Note that 1,600 megawatts (MW) is enough to power a 750,000 metric ton smelter. A 1,600 MW power station in the US would cost about $3 billion-$3.2 billion to build. This network powers the CBA smelter today. But it theoretically could sell its power to the market.
- A 2 million ton/year bauxite mine. Rio Tinto is a partner today in the MRN bauxite mine in northern Brazil. Rio and its partners recently approved an $890 million plan to relocate and extend the life of this mine, delivering about 12.5 million tons of bauxite per year. Prorating that to the CBA run rate, this investment would be equivalent to $142 million.
- An 800,000 ton/year alumina refinery. Estimates place a $1,000 per ton capital cost for a new alumina refinery or $800 million for the replacement cost of this asset.
- A 400,000 ton/year Soderberg aluminum smelter. An old smelter in need of retrofitting to prebake technology. Capital for new capacity ranges from $2,700 per ton in Indonesia to over $8,000 per ton in North America. If we take the low-end valuation, the replacement value is $1.08 billion.
- A 55,000-ton extrusion plant with finishing capacities including paint/anodizing. Conservative estimates value such capacity at $400,000.
- A 50,000-ton sheet mill. Replacement costs for this mill, which is a continuous caster “mini mill” range up to $1,500 per ton of capacity = $75,000,000.
In aggregate, the replacement value of mine, refinery, smelter, and downstream assets could approach $ 3 billion. So, the partners may have picked up the assets for about a 35% discount to replacement.
A platform for smelter retrofitting
The smelter may be the most intriguing part of the portfolio. It clearly begs for replacement. Rio owns the Aluminum Pechiney technology franchise and is a logical choice for the retrofit. They also hold a major stake in the new inert anode technology of Elysis, which is still in the proving stage.
This technology requires a virtual total teardown of an existing pre-bake smelter to install. CBA would be an ideal candidate for this, but the question whether Rio would allow the IP to be put into this joint venture with China. The Elysis partners have always said they wanted to license the technology out.
Strategic: Cheap low carbon power and smelting
The partners pick up these assets at discounts for replacement. Finding hydropower is exceedingly difficult today.
From Rio Tinto’s perspective, it broadens its footprint in Brazil in aluminum. It has long established ties to the sector with the MRN bauxite mine (1979) and the ALUMAR alumina refinery (1984). Now, it owns aluminum smelting and value-added assets in rolling and extruding. Owning these domestic assets, which sell in Brazil, may also afford them some tax benefits for their earnings at ALUMAR. Generating substantial domestic sales and earnings can shelter export-related earnings from Brazilian tax.
Rio also has strategic ambitions with Chalco. Chalco owns 11% of Rio. The companies are pursuing other joint ventures:
• The massive Simandou iron ore project in Guinea.
• Candelabro copper project in Chile
• La Compagnie du TransGuieen multi-user rail and port infrastructure in Guinea which support Simandou.
Iron ore and copper are central to Rio Tinto. Iron ore represents 65% of its EBITDA and copper, about 25%. Both commodities are dependent on Chinese buyers.
For Chalco, having Rio as a partner in Brazil makes the acquisition of CBA more politically acceptable in Brazil. CBA is the national aluminum company of Brazil, owned by a prominent Brazilian conglomerate in Votorantim. Having exclusive Chinese ownership by Chalco may not have gone done well in the country. There is growing concern about Chinese state-owned enterprises owning Brazilian energy and mining assets. Rio may pacify those concerns.
Why it matters
Rio Tinto continues to pursue initiatives in aluminum, such as its investigation in smelter projects in Finland and India. CBA adds South American aluminum to the portfolio. They clearly have the balance sheet and the vision to grow this business.
Chalco is keen to grow its influence in South America. Brazil is a huge trading partner of China in soybeans and has established EV production.
China is the world’s largest importer of copper, and they are active in Chile. They are a major investor in the “lithium triangle” of Argentina, Bolivia, and Chile. Peru has major Chinese investment in iron and copper. The acquisition of CBA fits Beijing’s massive plan of spreading its influence.
