London, England — MININGREVIEW.COM — 30 May 2008 – The Rio Tinto Group – second-largest aluminium producer in the world – has suspended work on its US$2.7 billion (R20 billion) Coega smelter project in South Africa, following failure by the country’s state-run utility Eskom Holdings Limited to guarantee power for the plant.
Bloomberg News quotes Rio Alcan Unit CEO Dick Evans as saying in an investor presentation here that the project will be delayed for three to four years, and engineers will be re-deployed to speed up projects in Canada, Oman and Malaysia.
Eskom, which generates 95% of South Africa’s electricity, has curbed supply to mines and smelters in the country since January, partly because of government delays in approving expansion of capacity, Bloomberg reports, and adds that the utility has a 25-year contract with Alcan to provide energy to the Coega smelter.
“Eskom has indicated it’s not possible to supply power to the project for about four years,” said Vukani Mde, a Trade and Industry Ministry spokesman, in a telephone interview with Bloomberg. “It is possible there might be power before that time and if there is, then the project should go ahead.”
Rio Tinto – which inherited the project after acquiring Alcan last year – said earlier this month that the plant at the Coega deepwater port in the southeast of the country would be capable of producing 720 000 tpa of aluminium a year when complete. Power can account for a third of the cost of producing the metal.
South Africa has “very critical power shortages,” Rio CEO Tom Albanese told reporters in London. The company’s “recent discovery of a billion tonnes or more of open-pittable coal in South Africa may help the country regain its surplus position in electricity, he added.