Global mining giant Rio Tinto has given the final green light to invest another US$2.7 billion in Kitimat, B.C., to complete the modernization of what will become one of the world’s most cost-efficient aluminum smelters.
The Anglo-Australian miner (NYSE:RIO) said Thursday the investment will allow the US$3.3-billion project in northern British Columbia to be completed in 2014.
Originally scheduled to cost $2.5 billion, the price tag has increased in four years because of escalating construction costs, the higher Canadian dollar and some changes to further improve its efficiency.
Its Montreal-based aluminum subsidiary, Rio Tinto Alcan, said the project will secure about 1,000 specialized jobs and create 2,500 jobs during the peak construction period.
“It is a good return project, drastically cutting our operating costs and that’s why decided to go ahead,” Rio Tinto Alcan chief executive Jacynthe Cote said in an interview from Prince Rupert, B.C.
Poor weather delayed her ability to attend an official announcement in Kitimat. Premier Christie Clark was forced to cancel her participation.
The Kitimat project is Alcan’s largest non-acquisition investment and will increase the smelter’s production capacity by more than 48 per cent to about 420,000 tonnes per year.
Rio Tinto and other global miners and metals producers are trying to expand output of the light-weight industrial metal to meet growing demand from China and other parts of Asia.
Aluminum is widely used in pop cans, packaging and in the automotive and aircraft sectors as well as construction and many other industries. With China and India rapidly growing their infrastructure, demand for the metal is soaring.
However, smelting alumina powder made from the mineral bauxite into aluminum metal requires major sources of hydroelectricity – which Quebec and B.C. have in abundance.
In fact, Kitimat is a Pacific coast company town built by the former Alcan in the 1950s after the Montreal company constructed the smelter, a local dam and hyrdoelectric plant and port to export the metal.
Rio Tinto said the first metal from the new expansion should roll out in the first half of 2014 and production will be ramped up over nine months.
The smelter will use Rio Tinto’s proprietary AP40 smelting technology and power from a hydroelectric plant to reduce carbon dioxide emissions.
Cote said the modernization will make the smelter among the most cost-effective operations around the world and mark a “radical” improvement over the existing facility.
“Once completed, Kitimat will be one of the most efficient and lowest-cost smelters in the world, and will better position us to serve the rapidly growing demand for aluminium in the Asia-Pacific market,” she said.
Powered by self-generated hydro and production technology, Kitimat will enjoy vastly lower costs and dramatically reduce greenhouse gas emissions.
The final go-ahead for Kitimat had long been expected by year-end, followed by decisions on further phases of the company’s AP60 project in Saguenay and Alma in Quebec.
The timing of those projects will depend on global economic market conditions, which are currently challenged, Cote said.
She declined to say when they could be approved or their potential cost.
Meanwhile, Cote said an announcement about a move of Rio Tinto Alcan’s corporate headquarters in Montreal is expected to be made early next year.
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