Rio Tinto to close New Zealand aluminium operation
By Josh White
Date: Thursday 09 Jul 2020
(Sharecast News) - Rio Tinto announced on Thursday that it will start planning the wind-down of operations, and the eventual closure of, its New Zealand Aluminium Smelters (NZAS) operation, following its strategic review.
The FTSE 100 mining giant said the review showed the business, located at Tiwai Point in the Southland region of the country, was no longer viable, given high energy costs and a "challenging outlook" for the aluminum industry.
As a result, NZAS has given NZX-listed hydroelectricity generator and retailer Meridian Energy notice to terminate its power contract, which will end in August 2021, when the wind-down of operations is expected to complete.
Rio Tinto said the review concluded that the smelter, which has made Rio Tinto an underlying loss of NZD 46m (£23.95m) in 2019, was not economically viable due to energy costs that were "some of the highest in the industry globally", coupled with a challenging short-to-medium term aluminum outlook.
Extensive discussions with a range of interested parties had failed to secure a power contract that would enable the operation to become both competitive and profitable, Rio Tinto said, referring to its talks with both power suppliers and the New Zealand government.
Over the next 14 months, NZAS and Rio Tinto would work closely with partners to implement wind-down plans, and eventually close the smelter.
"We recognise the decision to wind-down operations at NZAS will have a significant impact on employees, the community and our customers," said Rio Tinto Aluminium chief executive officer Alf Barrios.
"It is not a decision we have made lightly and without significant careful consideration.
"It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business."
The company would thus terminate the power contract and move to close the operation, Barrios explained.
"We are committed to working with our partners as we progress through detailed planning towards closure and we will do all we can together with the government to find ways to support the Southland community."
NZAS is a joint venture between Rio Tinto at 79.36%, and Sumitomo Chemical Company at 20.64%.
It employs around 1,000 people directly, and creates a further 1,600 indirect jobs in Southland, the company claimed.
At 0812 BST, shares in Rio Tinto were up 1.04% in London, at 4,660p.
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