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Rio Tinto Rejects N.Z. Offer of Support for Smelter, Key Says

April 2 (Bloomberg) -- Rio Tinto Group, majority owner of New Zealand’s only aluminum smelter, rejected an offer of a short-term government subsidy to keep the plant running.

“They came back at the weekend and said ‘no, we’re rejecting the government’s intervention’,” New Zealand Prime Minister John Key told TV3 today. “The government’s not going to change its position.”

Key’s government became involved after Rio unit Pacific Aluminium and electricity supplier Meridian Energy Ltd. were unable to agree on price terms for the smelter, located at Tiwai Point on the nation’s South Island. Rejection of offer stokes concern the plant may close, cutting jobs and curbing exports. Bruce Tobin, a Melbourne-based spokesman for Rio Tinto, didn’t immediately return a phone message seeking comment on the rejection.

“We do think it made a bit of sense on balance to try to support the process, and that’s where we’ve been simply because of the number of jobs involved,” Key said. “In the end, that hasn’t been possible.”

Under the existing contract, Rio must operate the smelter until 2016 and then it can be progressively shutdown. It would be expensive for Rio to close it faster, Key said.

The government has “no interest in a long-term subsidy of the smelter,” he said. “If it can’t stand on its own feet, then long-term it shouldn’t be there.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Chris Bourke at cbourke4@bloomberg.net

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