Rio Tinto steps closer to Malaysia aluminium smelter

Global miner Rio Tinto Ltd/Plc (RIO.AX: Quote, Profile , Research) (RIO.L: Quote, Profile , Research) will sign an agreement next week with its Malaysian partner to pave the way for a feasibility study on a $2 billion aluminium smelter, the partner said on Thursday. The signing between Rio Tinto and Malaysian construction firm Cahya Mata Sarawak Bhd (CMSM.KL: Quote, Profile , Research) is to be held on Tuesday in Kuching, capital of Malaysia's eastern Sarawak state where the proposed smelter would be built, a Cahya Mata spokeswoman said. She declined to give more details but a source familiar with the matter said the pact would be a heads of agreement, committing the parties to a feasibility study on the project. Cahya Mata is part-owned by the family of Sarawak Chief Minister Abdul Taib Mahmud. Its shares closed up 5.78 percent on Thursday at 2.93 ringgit per share. A Rio Tinto spokesman would not comment on the timing of any agreement but reiterated the firm's earlier remarks that it was interested in developing a smelter, based on power from Sarawak's huge Borneo hydro-electricity scheme now nearing completion. An aluminium smelter has been mooted for Sarawak, a part of Borneo island, for many years but has never left Malaysia's drawing board because of delays to the 2,400 megawatt Bakun dam. The hydro-electric dam is now three-quarters complete and is due to be finished in 2010. Rio Tinto has made an agreed bid worth $38.1 billion for aluminium maker Alcan Inc (AL.TO: Quote, Profile , Research), a deal that would make it the world's biggest aluminium maker. Aluminium prices are off their historic highs of 2006, but new aluminium smelters are sprouting around the world and existing smelters are being expanded. Alcoa (AA.N: Quote, Profile , Research), BHP Billiton (BLT.L: Quote, Profile , Research)(BHP.AX: Quote, Profile , Research) and China's State Grid Corp have also been reported to be interested in building the smelter in Sarawak.