October 29, 2008

Additional $300-million investment moves Rio Tinto Alcan’s Kitimat smelter project forward

RICHARD GILBERT

staff writer

An additional US$300-million investment will ensure that the Rio Tinto Alcan smelter modernization project moves forward.

The company announced that it will invest the extra cash into the first phase of the $3.5 billion project for its aging aluminum smelter in Kitimat, B.C.

The decision to increase investment follows a recent review of the company’s capital expenditures in response to the global financial crisis. The move increases the current phase funding total to more than US$500 million.

“This investment continues construction and maintains critical paths for the project, while we seek opportunities to reduce capital costs in the currently challenging economic climate,” said Dick Evans, chief executive, Rio Tinto Alcan.

The funding will secure the launch of an anode (an electrode through which electric current flows) baking furnace, substation, casthouse, and construction workers’ camp, as well as ancillary services.

“The Rio Tinto Alcan Kitimat aluminum smelter modernization will employ up to 1,500 construction workers at its peak and is scheduled for completion by 2011, so it’s an extremely important project to proceed with the economic downturn workers are facing,” said Wayne Peppard, executive director of the BC Building Trades Council.

“This means more construction workers will be needed in Kitimat immediately.”

During the fiscal review, the future of the project was uncertain.

“Against the backdrop of the current markets, the group is taking the opportunity to review the near term spending timelines and project costs of its capital expenditure program...” Tom Albanese, Rio Tinto’s chief executive, said at the time.

Even during the review, it was business as usual for some.

In response to these media reports, business manager with the Construction and Specialized Workers Union, Mark Olsen maintained that the project is moving forward as planned.

“We have not heard anything official and had orders placed with us from the main contractors VK Mason Construction, Western Industrial Contractors and Viking to place workers,” said Mark Olsen, business manager with the Construction and Specialized Workers Union.

“We look forward to building the project.”

Rio Tinto Alcan disclosed that bauxite production was up 93 per cent, alumina was up by 222 per cent and aluminium was up by 371 per cent, compared with the third quarter of 2007.

These figures reflect the acquisition of Alcan in the fourth quarter of 2007.

Members of the Kitimat Modernization Employer Association, which was formed by Bechtel Canada Co., contractors and a coalition of 16 building trades, signed a deal earlier this summer to supply qualified building trades workers for the project.

Rio Tinto Alcan awarded a US$200 million contract to Bechtel to conduct the complete engineering, procurement and construction management for the project.

The contract and the new collective agreement paved the way for a decision last week by Rio Tinto Alcan to increase funding for the project.

The modernization of the smelter will use new technology and increase production from 245,000 tonnes per year to about 400,000 tonnes per year, representing growth of more than 60 per cent.

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