PERTH (miningweekly.com) – Major Rio Tinto on Thursday announced that it would wind down operations and eventually close the New Zealand aluminium smelters (NZAS), following the conclusion of a strategic review.
The company in October last year announced a review into the future of the smelter, to determine the operation’s ongoing viability and competitive position, and in April this year closed one of the four potlines at the Tiwai Point aluminium smelter as part of measures to combat the Covid-19 pandemic.
The smelter in 2019 made an underlying loss of NZA$46-million, and was not considered economically viable owing to some of the highest energy costs in the industry globally, coupled with a challenging short- to medium-term aluminium outlook.
The company told shareholders that extensive discussions with a wide range of interested parties had failed to secure a power contract that would enable the operation to become both competitive and profitable.
Rio aluminium CEO Alf Barrios on Thursday said that the company recognised that the decision to wind down operations would have a significant impact on employees, the community and its customers.
“It is not a decision we have made lightly and without significant careful consideration. It is very unfortunate we could not find a solution with our partners to secure power price reductions aimed at making NZAS a financially viable business. We will therefore terminate the power contract and move to close the operation.
“We are committed to working with our partners as we progress through detailed planning towards closure and we will do all we can together with the government to find ways to support the Southland community,” Barrios said.
The wind down operations would take place over the next 14 months.
The project currently employs about 1 000 staff directly and creates a further 1 600 indirect jobs in Southland.
The New Zealand government on Thursday said that it would support the Southland economy in the wake of Rio’s decision.
“This day has unfortunately been on the cards for some time now, but nevertheless the final decision is a blow to Southland and all those who work at the smelter,” Finance Minister Grant Robertson said.
“The smelter supports hundreds of jobs in Southland and the government will work with the local community to support economic development in the region to help offset this loss.
“Rio Tinto has indicated it wants to work with the government to support the community during the wind down of the smelter.
“As we have done in Taranaki, we will support a just transition to more job opportunities. We know the strengths of Southland and we want to build on them in areas such as agriculture, aquaculture and manufacturing. There is also an opportunity to support other energy intensive projects like green hydrogen and data centres.
“There is a degree of inevitability to the decision, as Tiwai has been on the market since 2011, and former Prime Minister Bill English told Rio Tinto in 2013 there would be no further taxpayer money provided.
“Since the smelter opened taxpayers have been subsidising Rio Tinto to keep it open, either directly or indirectly through cheaper power, and Emissions Trading Scheme allocations of over $48-million per year. The company has made the decision not to keep operating without further subsidies.
“Rio Tinto globally has been battling decreasing aluminium prices and is facing similar issues in other countries.
“Given the challenging economic situation caused by Covid-19 it is disappointing Rio Tinto has chosen to close the smelter at this time especially given the support New Zealand has shown the company and how profitable they are globally,” Robertson said.
Energy and Resources Minister Dr Megan Woods said Rio’s decision not to extend its power contract with supplier Meridian would have a flow-on effect for the rest of the market.
“Eventually it will free up around 13% of total power generated in New Zealand which will relieve some pressure to build new generation. The increased supply will also have a positive impact on prices.
“It is disappointing that Rio Tinto is deciding to close one of the world’s lowest carbon aluminium smelters, in favour of keeping open coal plants.
“I also want to make clear that the government expects Rio Tinto to meet their obligations for clean-up of the site, an estimated NZ$256-million, and do the right thing on the dross,” Woods said.