Rio Reviewing Alumina Refinery As Market Conditions Worsen

Rio Tinto Group (RIO), the world’s second-biggest mining company, dropped a plan to convert its loss-making Gove alumina refinery to a cheaper fuel source because prices and exchange rates have worsened.

“Despite considerable efforts to improve the refinery’s performance, continuing low alumina prices, a high exchange rate and substantial after-tax losses for the refinery are key factors under consideration,” the London-based company said in an e-mailed statement. “Plans to convert the alumina refinery to gas will no longer proceed, and Rio Tinto is now considering future options around the alumina refinery.”

Rio has been reviewing the operation since at least last October. The review included talks with government to supply cheaper gas. Aluminum, which is smelted from Alumina, was Rio’s least profitable business unit last year, earning net income of $3 million on sales of $10.1 billion, according to data compiled by Bloomberg.

There has been no final decision about the future of the refinery and bauxite mining operations will continue “under all scenarios,” the company said. “Rio Tinto will be consulting with employees and the community in the coming weeks and will advise all stakeholders about its decision at the earliest opportunity.”

Rio fell 0.7 percent to A$64.93 at 12:26 p.m. in Sydney trading. Aluminum has declined 11 percent in the past year.

Gove, located 650 kilometers (404 miles) east of the territory’s capital Darwin, has about 1,400 employees and contractors, according to Rio’s website. Output was 1.6 million metric tonnes in the first nine months of 2013, representing about 24 percent of Rio’s total production.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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