HomeIndustrial MineralsRio Tinto scraps plans for South African smelter

Rio Tinto scraps plans for South African smelter

The global head
office of Rio Tinto
Alcan in Montreal
London, England — MININGREVIEW.COM — 16 October 2009 – Leading international mining group Rio Tinto has scrapped its plans to build an aluminium smelter on the southern coast of South Africa due to power shortages in the country. The company has been delaying the project due to the electricity crisis that brought the country to a halt last year.
“Although some progress was made in discussions regarding the supply of electricity to the Coega aluminium smelter project, it was insufficient to proceed,” the company said in a joint statement with the South African government and power utility Eskom.

Eskom has been rationing electricity since early last year when the national grid nearly collapsed, forcing mines and smelters to shut and costing the biggest economy in Africa billions of dollars.

Eskom has since launched a R385 billion rand expansion programme to boost supply, but has repeatedly said that the system continues to be tight, especially as the utility struggles to raise more funds to expand further.

The parties said they have terminated their agreement “’ struck between Alcan, which was later bought by Rio Tinto, and Eskom in 2006 “’ for a future supply of electricity to the 720 000 tonne green field smelter .They added that they may re-open discussions on the project again in the future.

“We remain ready to assist South Africa in realising the considerable benefits of a smelter project in the Port Elizabeth area,” said Guy Larin, vice president for Africa business development at Rio Tinto Alcan. He said the company had already invested around US$130 million (R1 billion) in the project, originally scheduled to start construction in September last year.

“Elements such as a long-term, a competitive power supply agreement, are essential and would need to be re-negotiated. We fully understand that conditions surrounding the availability and forward pricing of power in South Africa have shifted significantly in the last two years,” Larin added.