MONTREAL - Rio Tinto is on the verge of announcing major capital spending projects that could affect projects in British Columbia and Quebec, the miner's chief financial officer said Monday.
Guy Elliott told Australian media that the company is about to embark on the first substantial capital spending on Alcan since its acquisition.
The Australian newspaper said the two most likely options are the more than US$2-billion expansion of the Kitimat smelter in B.C., and the AP50 technology pilot plant in Saguenay, Que.
Both projects had been slowed down because of the global recession, which hurt aluminum demand and prices.
Rio Tinto has approved US$5.5 billion in capital spending this year and plans to spent US$13 billion by the end of 2011, including several costly projects in Canada.
Alcan division president Jacynthe Cote said in October that the company was cautiously watching the global economy and inventory levels ahead of giving the projects the green light.
Among them is the pilot plant for its AP50 technology, which will improve productivity by 40 per cent. The company broke ground on the Saguenay, Que., facility earlier this year and has received approval to spend $429 million.
It is also building a new high-efficiency, 225-megawatt turbine that will increase energy capacity at its Shipshaw power station. The $250-million project is to be completed by the fourth quarter of 2012.
Rio is spending $578 million preparing its smelter in Kitimat, B.C., for an upgrade using its proprietary AP technology.
CEO Tom Albanese recently said Kitimat has a great hydro-based system, but technology that he's not proud of.
"There are quite attractive financial returns…and it’s just a matter of moving forward with those," he told analysts.
Meanwhile, Elliott said Rio Tinto is planning a second wave of Alcan asset sales, this time involving smelters and refineries, to help turn around the aluminum business.
Alcan lost US$578 million last year after earning a US$1.3 billion profit in 2008. During the first half of the year, the division earned US$358 million.
Alcan has more than 20 smelters and five refineries around the world. He didn't mention which assets might be sold or whether any are located in Canada.
Rio Tinto Alcan's operations in Canada are generally cheaper to operate than other plants, due in part to cheap hydro power.
Nearly two years ago, the company announced the closure of its Beauharnois smelter near Montreal and reduced output at the Vaudreuil alumina refinery in the Saguenay region, affecting 300 jobs in Quebec.
Company spokesman Bryan Tucker said Rio, which wants to find $1 billion in additional cost savings by 2014, was evaluating its portfolio of assets for cost and productivity.
"Those that we aren't able to move down the cost curve through either cost improvement or productivity improvements will be evaluated for closure or divestment," Tucker said.
The asset sales would be part of a strategy that would also focus on cutting costs, getting more out of existing assets and investing in new assets.
Albanese said the company will work to remove some of the less effective or more marginal production facilities out of the system.
"We do have a natural strategic advantage around the cost and the availability of non-carbon base power to the extent that very few in the sector can compare, but we also have a fleet of older assets," he said.
Rio Tinto Alcan forecasts that global demand will nearly double over the next decade and grow at an average rate of four to five per cent over 20 years, largely the result of growing demand from China and emerging countries.
Rio Tinto is one of the world's largest miners with operations spanning the globe. It produces aluminium, copper, diamonds, coal, uranium, gold, industrial minerals and iron ore.
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