Rio Tinto's Gove Alumina Refinery Receives Lifeline from Northern Territory

Researched by Industrial Info Resources Australia (Perth, Australia)--The Northern Territory will assist Rio Tinto's bid to secure a 10-year supply of domestic natural gas to power the Gove alumina refinery. "The Northern Territory government has agreed to release enough gas to keep the Gove alumina refinery open for the next 10 years," announced Northern Territory Chief Minister Terry Mills and his Cabinet on February 11. The government also said that the "decision is subject to a commitment from Rio Tinto assuring the ongoing operation of the Gove alumina refinery, and from Eni SpA confirming details of their guarantee to supply gas to Power and Water Corporation until 2026."

In 2012, Rio Tinto performed a strategic review of the Gove refinery that highlighted the high cost of diesel, the fuel source currently used. A possible solution was a cheaper alternative fuel source, such as natural gas. The Chief Minister met with government officials, board members from the company, and Sam Walsh, the recently appointed CEO of Rio Tinto Pty Limited (ASX:RIO) (Melbourne, Australia), to discuss continuing operations at the refinery.

A pipeline could be very positive for the Northern Territory. Mills emphasized the possibilities of tapping into the existing eastern seaboard gas grid. "Once you have a gas pipeline in place, you then have access from others who are exploring in the region to butt into that pipeline," he said. Although this lifeline is a very positive decision to utilize the available natural gas, there is still the ongoing cost of the refinery operation during the transitional timeframe that will still rely on a decision from Rio Tinto to proceed.

The Gove Mining Operation is located on the Gove Peninsula in northeast Arnhem Land in the Northern Territory, approximately 650 kilometers east of the territory's capital of Darwin. Bauxite reserves were discovered as early as 1955, leading to mining lease grants by the Commonwealth government in1969. Mining accommodation infrastructure soon followed, and the township of Nhulunbuy was established by 1972. Since operations began, the township has benefited greatly from the carry-on effects of the local economy, stimulated by the mining operations that consist of a mine, refinery, residue disposal storage facility, port and steam power station.

Employing between 1,200 and 1,500 permanent staff and contractors, one can imagine the degree of separation effects that a decision to suspend or mothball this operation could have. To shut down the refinery would result in a heavy price that people would pay with such a reliance upon the mining operations as the communities in these regional areas, especially that of the satellite town Nhulunbuy with an average population of 4,000 people.

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