Rio, CMS to sign agreement for mega- aluminum smelter study

London-based mega-miner Rio Tinto and Malaysian construction firm Cahaya Mata Sarawak Bhd (CMS) are scheduled to sign an agreement Tuesday for a study for what could become one of the world's largest aluminum smelters. The Malaysian federal government is likely to approve the construction of two aluminum smelter plants in the Malaysian state of Sarawak (located on the island of Borneo), using cheap hydro-energy resources to be provided by the controversial Bakun hydro-electricity project. The Bakun Hydroelectric Project involves the building of the tallest concrete-faced rockfill dam in the world, and the largest dam in Asia outside of China. It is expected to generate 2,400 megawatts of electricity. It is being built by the Malaysia-China Hydro JV consortium, led by Sime Engineering Berhad of Malayasia and Sino-Hydro Corporation of China. Originally proposed in the early 1960s, the dam, which was scheduled for completion this year, is 18 months behind schedule and should be completed by 2010. The project--which involves flooding a 70,000-hectacre area the size of Singapore, and the relocation of 9,000 native peoples from the project site-has attracted strong environmental opposition. Malaysian and international environmental groups have expressed their opposition to the dam and to the development of a Malaysian smelter industry. According to the agreement to be signed Tuesday, Rio Tinto and Cahaya will carry out a study of $A2.33 billion (US$1.99 billion) smelter in Similajua, Sarawak. The AFP reported that an industry source familiar with the plan said it is expected to begin production in 2010. "If the project takes off, it has the potential to be one of the biggest aluminum smelters in the world," the source told AFP. Rio Tinto is currently in the midst of a $38.1 billion friendly bid for Canadian aluminum producer Alcan, which, if successful, will result in the creation of the world's largest aluminum manufacturer. Reuters said a Rio Tinto spokesman reiterated that the mega-miner's earlier comments that it was interested in developing a Malaysian smelter utilizing Bakun's power supply. Chinese smelters have also expressed interest in obtaining cheap power from the Bakun project.