Rio Tinto Alcan Remains Committed to $2.5 Billion Kitimat Smelter Modernization Despite Economic Downturn

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite the current worldwide market conditions, one big-ticket project continues to move forward, albeit at a much slower pace. With final capital funding approval still pending and not expected until late 2009, Rio Tinto Alcan Primary Metal (British Columbia, Canada), a subsidiary of Rio Tinto (NYSE:RTP) (London), continues some basic engineering and design with limited remaining funds already in place for its plan to fully modernize and expand the Kitimat Works aluminum smelter in Kitimat, British Columbia.

The $2.5 billion project, which was originally scheduled to begin construction last year, includes a $200 million, 700-megawatt electrical substation and an anode baking furnace and will implement Aluminum Pechiney-35 Reduction Cell Technology. It will also increase the smelter's production by more than 40% from 275,000 tonnes per year to about 400,000 tonnes per year and increase Rio Tinto's annual global primary aluminum production capacity by more than 3%, as well as reduce greenhouse gas emissions by 500,000 tonnes per year.

In addition, Rio Tinto's website claims the modernization "will secure about 1,000 stable, technically enriched jobs in British Columbia's northwest region for the long term and roughly double this number during the construction phase."

In July 2008, Bechtel Limited (Montreal, Quebec), a division of the Bechtel Group Incorporated (San Francisco), signed a $200 million engineering, procurement and construction management agreement with Rio Tinto Alcan for the Kitimat Works modernization project.

Project managers at Bechtel say the project is in a one-year holding pattern as it waits for final capital approval and a global economic turnaround, but interested subcontractors and vendors are welcomed to submit their qualifications in writing.

Media Relations Director Stefano Bertolli said in a December 14, 2008, interview on CFTK-TV, a news station in British Columbia, that Rio Tinto is waiting for global demand for aluminum to rebound before committing more capital to the project.

"The project will move forward at a slower rate, so that when markets do pick up, and the price does become a bit more favorable, we will be able to put it back on an accelerated course," Bertolli said.

Assuming Rio Tinto Alcan receives final capital approval by the end of 2009, construction could kick off by fall 2010 with an anticipated completion in the fall of 2013. For related information, view August 27, 2008, news article - Rio Tinto Posts Record Earnings for first half of 2008, Fending off BHP Billiton Takeover.

Since 1997, Rio Tinto has spent about $25 million on feasibility studies to modernize the Kitimat Works aluminum smelter, according to the company's website.

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