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Australia Commits Gas Supply for Rio Unit’s Alumina Refinery

Australia’s Northern Territory government committed to supply gas to Rio Tinto Group’s Gove alumina refinery after the world’s second-biggest mining company said it may shut the plant due to high fuel oil costs.

“The Northern Territory government has now guaranteed a gas supply for the Gove refinery, and it is now up to Rio Tinto to make a commitment to keep the operation open,” Chief Minister Terry Mills said today in an e-mailed statement.

Gove needed a clear and unconditional commitment to supply gas in order to remain operational, Sandeep Biswas, the chief executive officer of Rio unit Pacific Aluminium said last month before the London-based company completed a review of the refinery. Rio started a review of the operation in October because of higher fuel oil costs and low alumina prices.

“Rio Tinto will give full consideration to the Northern Territory government’s important gas supply proposal,” Biswas said today in an e-mailed statement. “Due to the rising cost of heavy fuel oil, coupled with a high exchange rate and low alumina price, the refinery has sustained heavy losses for some time,” according to the statement.

The government has agreed to release enough gas to keep the refinery open for the next 10 years, according to the government’s statement. The commitment is subject to gas supplier Eni SpA confirming details of their guarantee to supply the fuel to the Northern Territory’s Power & Water Corp. until 2026, it said.

Rio Tinto announced plans in October 2011 to sell 13 aluminum assets, including Gove, to improve the group’s financial performance and transferred smelters, mines and alumina plants to the new unit. Gove in 2012 produced 2.7 million metric tons of alumina and 7.9 million tons of bauxite, according to its website. Both alumina and bauxite are raw materials in the production of aluminum metal.

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