Global miner Rio Tinto further improved its cash position on Monday by agreeing to sell its Americas food packaging business for $1.2 billion, and analysts said they expected more asset sales to follow soon.

Rio Tinto, which only last week raised $15.2 billion in one of the world's largest-ever rights issues, will sell the assets to U.S.-based Bemis Co Inc for $1 billion in cash, with the rest potentially paid in the form of Bemis shares.

The deal moves Rio Tinto closer to the day when it can draw a line under its near-disastrous 2007 acquisition of aluminum and packaging firm Alcan. Bought near the height of the commodities boom, Alcan left Rio Tinto with $38 billion in debt.

Rio Tinto had hoped to repay some of the Alcan debt by quickly on-selling the packaging assets, but the global financial crisis delayed that plan as asset prices tumbled.

Rio Tinto said the remaining Alcan non-aluminum assets were still on the auction block, with their book value likely to be written down ahead of their sale.

Separately, two sources told Reuters, Australian packaging group Amcor Ltd was still in talks to buy some of the remaining packaging assets from Rio, which Citigroup estimates could potentially fetch in excess of $2 billion.

An Amcor spokesman declined to comment.

Analysts widely expect Amcor to raise up to A$2.0 billion in fresh equity if it wins the auction.

Any packaging assets that Rio is getting rid of its balance sheet is good and will be liked by the market, Olivia Ker, research analyst with Merrill Lynch, said after the news. Monday's announcement takes Rio's expected proceeds from asset sales this year to $3.7 billion, and analysts say Rio would be encouraged to sell other non-core assets in the coming days.

The rest of the packaging business is certainly on the cards, the rest of the coal division is still on the cards, Ker added.

Rio Tinto shares fell 2.2 percent at A$48.50, in line with its major mining rival, BHP Billiton , which shed 2.4 percent.

SOLID VALUE

The sale of the Food Americas division is the first significant step in reducing the asset portfolio acquired with Alcan, Rio Tinto Chief Financial Officer Guy Elliott said in a statement.

The transaction represents solid value given the challenging financial environment.

Rio Tinto opted for its $15.2 billion rights issue, the world's fifth largest, after aborting a controversial plan to sell $19.5 billion in convertible debt and assets to a major shareholder, Chinese state-owned Chinalco.

At the same time as abandoning the Chinalco deal, it announced a major iron ore joint venture with BHP Billiton which would deliver both firms $10 billion in savings.

Under the deal announced on Monday, Wisconsin-based Bemis said it was buying 23 flexible-packaging plants in the United States, Canada, Mexico, Brazil, Argentina and New Zealand.

It said it was paying about 6.7 times earnings before interest, tax, depreciation and amortization for the business, when $100 million of tax benefits were taken into account.

The deal, which is expected to close by end 2009, will increase Bemis' earnings from 2010 and add about 4,600 employees to Bemis' global workforce, the company said in a statement.

($1=A$1.26)

(Editing by Lincoln Feast)

Merrill Lynch Citigroup