Rio Tinto Puts $1.8 Billion into Australian Alumina Project and Eyes Alcan

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Researched by Industrial Info Resources (Sugar Land, Texas). With expansion of aluminum assets very much in mind as it enters the Alcan (NYSE:AL) (Montreal, Quebec) takeover bidding fray, Rio Tinto (NYSE:RT) (London, UK) has announced plans to invest $1.8 billion in the expansion of production capacity at its Yarwun alumina refinery in Gladstone in Queensland, Australia.

The company will supply bauxite for the refinery from its long life mining resource at Weipa in northern Queensland. The expansion will more than double annual production at the smelter from the current 1.4 million tons per annum (tpa) to 3.4 million tpa by 2011. The expansion at Yarwun will have the benefit of substantial scale efficiencies gained form the construction of the first stage of the refinery.

Rio Tinto had previously placed expansion plans at Yarwun on hold, citing cost pressures, and the decision to go ahead with the project is now seen as complementing the Alcan bid rather than as a diversion of interest away from the possible takeover.

The expansion of the Yarwun Alumina refinery is one of the most significant investments made by the company in recent years. The attractive fundamentals of the aluminum industry, combined with Yarwun’s well located, low cost position and our excellent bauxite resource at Weipa, reinforce the deep underlying strength of the group’s organic growth pipeline,” said Tom Albanese, Chief Executive of Rio Tinto.

Oscar Groeneveld, Chief Executive of Rio Tinto Aluminum said that the Yarwun project put the company firmly in the first quartile of the alumina cost curve in the world traded alumina market. He said that the project further strengthened the company’s aluminum structure in Gladstone and Queensland. He added that the project had received a high level of encouragement from federal, state and local governments as well as community support. Groeneveld said that an important feature of the project was the inclusion of a gas-fired cogeneration facility and that gas would become the refinery’s primary fuel source demonstrating an ongoing commitment to the reduction of gas emissions and the improvement of energy efficiency. Work on the expansion project is scheduled to start in Q3 of 2007 and is expected to take about three years to completion. First shipments from the expanded capacity are expected in the second half of 2010.

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