Future of smelter in melting pot

Last updated 05:00 01/12/2012

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It is unclear if Rio Tinto‘s US$5 billion cost cuts globally will affect the Tiwai Point aluminium smelter near Bluff.

This week Rio Tinto announced at an investor seminar that it would make the cuts to its operating and support costs by the end of 2014.

The global miner said its coal and aluminium operations would be the focus of its targeted cuts.

The company was focusing on its lucrative iron ore operations in Western Australia, where it now expects to ramp up production to 360 million tonnes a year.

The global cuts would not be restricted to labour costs alone, with the company declaring it will look "absolutely everywhere" across its business for savings.

The $US5b (NZ$6.1b) plan, which builds on $US500 million of savings already achieved during 2012, will be complemented by a "more aggressive" approach to divestment of non-core assets, with action likely on "laggard divisions" like aluminium and boutique businesses like diamonds. Both had been earmarked for divestment for some time.

Rio Tinto chief financial officer Guy Elliott said they might not be the only assets sold over the next year.

"There will be further divestments to come as we optimise the portfolio in addition to the sales we've already announced, and we expect substantial cash proceeds in 2013," he said.

In October last year Rio Tinto said interests in six Australian and New Zealand assets - including the Tiwai Point smelter - would be transferred into a new business until called Pacific Aluminium, which would be sold.

When contacted by The Southland Times, a spokesman for Rio Tinto in Australia said the company was targeting cumulative savings of $5 billion across all its businesses.

He said the company was not being specific about individual businesses or locations and was continuing to look at all divestment options for Pacific Aluminium.

A spokesman for Pacific Aluminium said that because NZAS was a joint venture between Rio Tinto and Sumitomo Chemical Company Ltd, it was not able to comment directly on any Rio Tinto announcement.

NZAS had completed its plan to reduce the Tiwai Point workforce by 100 by the end of November. Despite that reduction and a freeze on $70 million in capital expenditure at Tiwai, NZAS was continuing to lose money, the Pacific Aluminium spokesman said.

Further cost-saving initiatives were being pursued to try to make NZAS a viable and cash-positive business.

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- The Southland Times

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