Rio Tinto scraps South African aluminium smelter plan

Reuters reported that Global miner Rio Tinto scrapped its plan to build an aluminum smelter on the southern coast of South Africa due to power shortages in the country. Rio Tinto has been delaying the project due to an electricity crisis that brought the country to a halt 2008. Rio Tinto said in a joint statement with the South African government and the power utility Eskom that "Although some progress was made in discussions regarding the supply of electricity to the Coega aluminum smelter project it was insufficient to proceed." Eskom has been rationing electricity since early last year when the national grid nearly collapsed, forcing mines and smelters to shut and costing the biggest economy in Africa billions of dollars. It has since launched a ZAR 385 billion expansion program to boost supply but has repeatedly said that the system continues to be tight, especially as the utility struggles to raise more funds to expand further. The parties said that they have terminated their agreement for a future supply of electricity to the 720,000 tonne green field smelter struck between Alcan later bought by Rio Tinto and Eskom in 2006. They may open up discussions on the project again in the future. Mr Guy Larin VP for Africa business development at Rio Tinto Alcan said that "We remain ready to assist South Africa in realizing the considerable benefits of a smelter project in the Port Elizabeth area.” He said that the company has so far invested around USD 130 million in the project, originally scheduled to start construction in September 2008. Elements such as a long term, competitive power supply agreement are essential and would need to be renegotiated. We fully understand that conditions surrounding the availability and forward pricing of power in South Africa have shifted significantly in the last 2 years. (Sourced from Reuters)