CMS, Rio Tinto's Proposed Aluminium Smelter Aims For Full Production By 2011

Conglomerate Cahya Mata Sarawak Bhd (CMS) and global Anglo-Australian miner Rio Tinto Tuesday signed an agreement for the proposed development of a US$2 billion (RM7 billion) aluminium smelter in Sarawak. The plant in Similajau, Bintulu division is expected to go into full production by the end of 2011. Rio Tinto Aluminium Limited Chief executive Oscar Groeneveld said today the smelter would have an initial production capacity of 550,000 tonnes per year and the capacity to expand to 1.5 million tonnes, with its raw materials to be sourced from its Australian Yarwun alumina refinery in Gladstone, Queensland. "At the first stage, when it is expected to commence operation by the fourth quarter of 2010, about 900 megawatts of electricity will be utilised from the Bakun dam while we are looking at establishing joint partnership with Sime Darby Bhd (Bakun's owner), to use its energy in the long term should there be opportunities to expand in subsequent stages," he told reporters after the signing of the agreement today. The agreement between CMS, represented by its group chairman Tan Sri Syed Anwar Jamalullail, group managing director Datuk Richard Curtis and deputy group managing director Syed Ahmad Alwee Alsree, and Rio Tinto, represented by Groeneveld, Smelting (Australia) managing director Sandeep Biswas and Smelter Project Development general manager Matt Liddy, was witnessed by Chief Minister Tan Sri Abdul Taib Mahmud and Australian High Commissioner Penny Williams. Following the agreement - detailing feasibility studies on the design, engineering, construction, commissioning and operation of an aluminium smelter - the project will be known as Sarawak Aluminium Company (Salco), with CMS taking 40 percent stake and Rio Tinto 60 percent initially. Groeneveld said over the next 12 to 18 months, Salco would be examining the technical, environmental, operational, social and economic aspects of the proposed smelter, which would be on an industrial site of eight sq km to incorporate downstream activities. Given that the smelter would be a Malaysian project, he said, locals would be given priority in terms of employment with about 1,300 jobs expected to be generated and a further 3,500 in indirect jobs. According to an independent study, the smelter has the potential to generate RM3 billion per year to the country's gross domestic product (GDP) at current metal prices, he said. Meanwhile, Curtis said CMS would raise funding for the project from its own equities and the international capital market. Earlier, Taib said the development of the smelter project was timely as it would be the catalyst for the next phase of Sarawak's economy based on energy intensive industries under the Central Development Corridor, which is expected to be implemented by next year. Under the Ninth Malaysia Plan, the Sarawak government has earmarked Sarawak's central region, stretching from Tanjung Manis in Mukah to Similajau to set up energy intensive industries to take advantage of the ample energy resources, including oil and natural coal deposits and hydro power from river systems. Taib was happy to note that Salco was committed to providing industrial training of locals in overseas smelters and educational institutions besides conducting in-depth community and environmental assessments for the host communities in the state.