MONTREAL (CP) -- Canadians who watched nervously as Alcan Inc. [NYSE:AL; TSX:AL] moved to foreign control likely have nothing to fear from the proposed US$149-billion takeover of Rio Tinto [NYSE:RIO] by mining giant BHP Billiton, industry analysts say.
Commitments made by London-based Rio Tinto ahead of its recent purchase of Alcan - including upgrades to smelters in Kitimat, B.C. and Saguenay, Que. - won't likely be affected by BHP's pitch for Rio Tinto, mining analyst Charles Bradford of Soleil-Bradford Research told The Canadian Press.
''When you buy something you don't want to sell off the good things or close the good things,'' he said in an interview from New York City.
''And in this case, I think there is relatively little they want to dispose of.''
Bradford said he believes BHP would abide by Rio Tinto's commitment to honour the Quebec government energy agreement.
Montreal would probably remain headquarters of the aluminum division even though the issue of head offices is sensitive with BHP proposing to consolidate its global headquarters in Australia, he added.
''I think it would be stupid if BHP tried to make changes that would damage the property and these are not stupid people,'' he said.
BHP Billiton is the world's sixth largest producer of primary aluminium, with a total operating capacity of more than one million tonnes of aluminum, 14 million tonnes of bauxite and four million tonnes of alumina per year.
Joining forces would make it the world's largest metals and mining company and a top-five company with more than C$350 billion of market capitalization.
Company officials failed Tuesday to shed much light about the impact of their proposal on Rio Tinto's aluminum operations.
On Monday, it said the deal would produce at least US$3.7 billion in annual revenue and cost synergies in seven years. It's unclear, however, how much of that total will derive from aluminum operations as observers expect most of the savings to come from iron ore overlap in Australia.
Aluminum would account for 16% of the combined company's US$40.2 billion of EBITDA (earnings before income taxes, depreciation and amortization).
By purchasing Rio Tinto, BHP would diversify its aluminum smelting capacity by adding cheap North American production to its base in South Africa, Mozambique and Brazil.
Rio Tinto's Kitimat smelter is listed among the tier one assets of the enlarged company. But Saguenay doesn't appear on the list.
BHP spokesman Illtud Harri said the list isn't exhaustive.
''While there are no guarantees that this transaction will occur, we fully understand the important contribution of Rio Tinto with regards the economy of Quebec and Canada,'' he said in an interview from London.
Tom Gidley-Kitchin of Charles Stanley said it makes sense for BHP to keep the aluminum divisional head office in Canada.
''I wouldn't have thought there would be huge changes to be honest,'' he also said from London.
''I think the way Rio set it up seems to work well.''
BHP would also sell Alcan's packaging business and other non-core assets that are expected to raised US$10 billion to be applied towards debt, he added.
''I'm sure that BHP will proceed with all of those disposals and they may have a few others of their own.''
Rio Tinto has rejected its rival's all-share offer as inadequate.
And company spokesman Nick Cobban said they aren't being distracted by the takeover pitch as they continue integrating Alcan's operations.
''All the good things about Alcan that we saw at the time of the bid that we made back in July still apply,'' he said in an interview.
''It's a world-class resource with world-class smelters and other resources. Our focus is on integrating that into the larger Rio Tinto organization.''
Bradford and Gidley-Kitchin believe Rio Tinto will ultimately be accepted after BHP sweetens it by adding a cash component.
Gidley-Kitchin expects the offer price will increase by 15 to 20%, to more than 65 British pounds per share.
''Something with cash that is at some level above 60 pounds may be enough to secure agreement,'' he said.
Ultimately, he said a Rio Tinto's board will meet with BHP and endorse a friendly deal much like what it engineered in acquiring Alcan as it fended off a hostile bid from American rival Alcoa Inc.
Both companies share an approach and vision of the mining industry. They believe that metal prices, including aluminum, will gain strength in part because of growing demand in China and India.
''I think they were an interested party for Alcan for all the same reasons that Rio was interested,'' Gidley-Kitchin said.
Both analysts said they doubted other metal companies could successfully step in should BHP's bid fail. CVRD is busy with its Inco acquisition while Anglo-American and Xstrata aren't large enough to purchase Rio Tinto in its entirety.
Bradford said the deal makes sense but makes the Chinese nervous because of the likelihood of price increases for iron ore.
Alcan shares lost C$1.51 to C$96.54 in trading Tuesday on the Toronto Stock Exchange.
Copyright 2007 The Canadian Press