SYDNEY, Nov 29: Miner Rio Tinto said on Friday it will stop alumina production at its Gove refinery in Australia, as the plant is no longer viable amid difficult market conditions.
Rio said it will start winding down production in the first quarter of 2014 and will continue the phase-out during the year. The process would take ‘some time’, it said.
The announcement was expected after Rio said earlier this week it had decided not to convert the Gove plant to use gas-fired power. The refinery, which employs 1,400 workers, is part of the Pacific Aluminium business that Rio tried to sell, but then reintegrated into its business in August.
The decision comes a day after the mining giant unveiled plans to increase its iron ore capacity towards 360 million tonnes by 2017, cutting costs by $3 billion by not digging new mines and slowing the expansion by about two years.
Like other miners, Rio has come under pressure from investors to cut costs, reduce capital spending, slash debt and boost returns as commodity prices cool.
The company’s shares rose 2.7 percent to A$66.15 in early trade, outperforming a 0.7 percent rise in the materials sector .
Rio will continue to mine bauxite at Gove and said on Friday it will focus on establishing ‘long-term certainty’ for the bauxite operation. Bauxite is refined to produce alumina, which is then processed to yield aluminium.
The company produced 1.6 million tonnes of alumina in the first nine months of this year at Gove, down 22 percent from the same period in 2012, and produced 5.8 million tonnes of bauxite, down only slightly from the same period last year.
Rio said the refinery had suffered substantial after-tax losses despite efforts to improve performance, and faced continuing low alumina prices and a high Australian dollar exchange rate.
Earlier this year, Rio Tinto had lined up a deal with the Australian and Northern Territory governments to secure gas supplies for the plant, to replace more expensive diesel, with the help of a state-subsidised pipeline.
However a new territory chief minister in July cut the amount of gas that was to be set aside for the plant, looking to ensure that Northern Territory taxpayers would not face potential energy shortages and higher power bills.
Rio said it would consult its 1,400 workers and the local community in the coming weeks. The refinery is the biggest employer on the Gove Peninsula, about 650 km (400 miles) east of Darwin.
‘This is a very sad day for everyone associated with Gove,’ Rio Chief Executive Sam Walsh said in a statement. ‘There is no doubt a challenging path ahead.’
(AGENCIES)
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