Rio Tinto eyes smelter closure

Mining giant Rio Tinto - which has its loss-making Tiwai Pt aluminum smelter near Bluff for sale - is considering shutting a similarly loss-making aluminium refinery in the Northern Territory, which employs 1600 people.

In both cases, electricity costs play a major part in determining the plants' futures, against a backdrop of a global slump in aluminium prices.

At Tiwai, a total target of about 100 jobs losses from 800 staff was achieved recently from redundancies and natural attrition.

Rio said on Monday it was considering shutting the Nhulunbuy plant in the NT's northeast, near Gove, but that would require building a gas pipeline across the remote Arnhem Land, at a cost of $A900 million ($NZ1.13 billion), in order to convert the refinery from heavy fuel to gas, AAP reported.

However, crucial gas supply deals are yet to be secured, despite the NT having large potential for new gas production.

Tiwai's management, New Zealand Aluminium Smelters, has been in negotiation over its 27-year electricity supply deal with state-owned enterprise Meridian Energy, which supplies the smelter with Manapouri power, accounting for almost 15% of consumption nationwide, at undisclosed prices.

At Meridian's annual meeting last month, chief executive Mark Binns said, while details of the talks were confidential, Rio was told of some amendments Meridian was prepared to make to the supply deal and others it was not, Stuff reported.

Rio owns 79.4% of the 42-year-old Tiwai Pt smelter and a more than a year ago bundled Tiwai up with 12 other smelter assets for sale under the banner of a new subsidiary, Pacific Aluminium.

Six months ago Rio's chief executive, Tom Albanese, met investors in Sydney and said the aluminium assets in Australia, New Zealand and France could be vulnerable if poor market conditions continued. Rio's aluminium division's profit had dropped 93% in the June half-year compared with the year before.



At a glance


• NZAS is New Zealand's only aluminium smelter and largest electricity consumer.

• Annual production in 2011: 354,000 tonnes.

• NZAS contributes $525 million to the Southland economy annually and supports more than 3200 direct and indirect Southland jobs.

• In 2011, NZAS made $391 million in payments to New Zealand suppliers, including $51 million to Southland suppliers.


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