Rio Tinto admits time running out for its only UK plant

Rio Tinto has given warning that the future of its only operation in the UK is bleak, negotiations on its future having failed to deliver a solution, The Times has learnt.

The mining giant, which reported record profits of $7.4 billion (£3.7 billion) yesterday, wants to keep open its aluminium smelter in Anglesey, Wales, once the neighbouring nuclear power station is decommissioned.

Aluminium production is one of the most energy-inten-sive industrial activities, and access to cheap power is vital. For this reason, the Wylfa nuclear power station and Anglesey Aluminium's smelter, which employs more than 500 people, were built next to each other in the early 1970s. However, Wylfa is reaching the end of its life and will be decommissioned in 2010.

Rio Tinto, the majority owner of Anglesey Aluminium, is negotiating with the Nuclear Decommissioning Authority (NDA) to keep the power station open beyond that date. It is also talking to the Department of Trade and Industry (DTI) and electricity suppliers about access to alternative sources of cheap power.

However, the options for Rio are running out, as the NDA is refusing to extend Wylfa's life and it would probably breach competition rules if the DTI arranged a cheap power deal.

Anglesey Aluminium, which produces 143,000 tonnes of metal worth more than $400 million a year, uses one third of the neighbouring power station's output. Buying that quantity of power from the national grid would be prohibitively expensive without heavy discounts, which are unlikely from commercial suppliers.

Leigh Clifford, the chief executive of Rio Tinto, said: "Anglesey is very viable from a technology point of view, but it does require competitively priced power. The potential closure of that power station has put the aluminium plant in jeopardy. We are looking at options but, to be honest, they are very limited. Anglesey does not look great beyond 2010."

Rio's power deal with Wylfa ends in 2009, but the company is likely to sign an extension until 2010.

The future of the Anglesey operation was one of the few negatives to come out of Rio Tinto's results yesterday. The Anglo-Australian miner reported a 43 per cent rise in earnings to $7.4 billion and it boosted the dividend by 30 per cent to 104 cents a share. Rio returned $4 billion to investors last year through a share buyback and is buying back a further $3 billion.

The company plans to expand a number of mines around the world and to spend $860 million enlarging its port in Pilbara, Western Australia.