$2-billon plan awaits final word, but CEO for Alcan’s owner sounds optimistic
Scott Simpson
Sun
Rio Tinto CEO Tom Albanese: Kitimat smelter a strong candidate for renewal. Photograph by : Ian Smith, Vancouver Sun
A final decision won’t come for several months, but the chief executive officer of Rio Tinto Alcan is bullish on his company’s $2-billion plan to modernize its aging smelter in Kitimat.
CEO Tom Albanese, in his first British Columbia tour since global mining giant Rio Tinto took over Quebec-based Alcan last year, said on Monday he believes global aluminum prices will show sustained strength due to economic growth in China.
Moreover, Kitimat’s access to low-cost electricity means that the 50-year-old smelter on B.C.’s north coast is an exceptionally strong candidate for renewal — with production costs lower than those of modern aluminum smelters in China.
Kitimat relies on hydroelectric power from its venerable Kemano generating facility — while China’s input costs for aluminum include pricer electricity from new coal-fired generating plants.
Pending board approval, a replacement facility could be in full production by 2011, Albanese told The Vancouver Sun editorial board.
Three primary hurdles have been cleared with the settling of a long-term labor contract with unionized smelter workers, environmental approvals have been received, and the B.C. Utilities Commission has approved a new long-term power agreement between the company and BC Hydro.
On paper, the modernization deal looks like a winner for the company, which will be able to increase aluminum production 40 per cent while cutting greenhouse gas emissions 40 per cent from current levels.
Nor is Rio Tinto Alcan concerned that a slumping U.S. economy will have a noticeable impact on demand or price.
“In the beginning of 2007, China consumed a quarter of the world’s aluminum. By the end of the year they consumed a third of the world’s aluminum,” Albanese said during a Vancouver Board of Trade luncheon.
“As important as it is to the world economy, the U.S. is not as influential as it once was for global demand for metals and minerals.”
However, he cautioned that the project will still be subject to scrutiny by the board of directors of parent corporation Rio Tinto Group before moving ahead.
“We are now moving for final board approval of the project, which may come later in the year and as I have stressed with the local team, they have lot of work to do in the next couple of weeks, the next coming months, to make that happen,” Albanese said.
“It’s in their hands now.”
There is also lingering uncertainty in the wake of an unsuccessful attempt by Australia-based BHP Billiton to take over its mining rival — although Albanese said that since the BHP offer was unanimously rejected in February, his own company is moving ahead on the premise that it will retain its autonomy.
The 50-year-old Kitimat smelter employs 1,500 workers at present, and a modern replacement will require 1,000 — but Albanese said it will reduce the local workforce “respectfully” through attrition.
He added that he expects that the smelter, which pays an average wage of $85,000, will need to attract more young workers during the construction phase who will then put down roots in the community as the modernized plant becomes operational.
The company has been in an antagonistic relationship for the past decade with the district government in Kitimat, which has argued both in and out of court that the smelter should be built on a scale that reflects total potential hydroelectric water resources rather than the likely lowest water volume in dry years.
The arrangement between Rio Tinto Alcan and BC Hydro allows the company to sell its so-called ‘surplus’ water to Hydro.
Kitimat Mayor Richard Wozney attended Albanese’s board of trade speech and expressed hope that the new owners of the smelter will move ahead with the modernization rather than impose further delays.
“From our perspective as a community we’ve been after Alcan over the past 10 years to do something about modernization and hopefully now Rio Tinto, who have committed that they will take over and do the modernization project,” Wozney said.
“Alcan has made a lot of promises and kept none of them. I hope that in this case Rio Tinto keeps and honors its promise and actually do the modernization project.”
© The Vancouver Sun 2008
