SYDNEY Feb 1 Last-ditch efforts are underway to
persuade Rio Tinto to maintain production at
its Gove alumina refinery in Australia after talks with
potential gas suppliers to reduce costs ended without a
Rio Tinto subsidiary Pacific Aluminium has said if it can't
run the 2.5 million tonnes-per-year refinery on natural gas it
will suspend production, putting up to 1,400 jobs at risk, many
from within the indigenous communities of far north Australia,
one of the country's most economically depressed regions.
The company set a Jan. 31 deadline to find the gas.
The fate of the refinery represents the first hardline
decision facing Rio Tinto's new chief executive, Sam Walsh, as
under-performing units in the company come under tougher
scrutiny following $14 billion in writedowns last month.
The refinery runs on diesel, which Rio Tinto has said is too
expensive given the heavy losses it incurs owing to a weak
Vowing to "knock on every door", Northern Territory Chief
Minister Terry Mills plans to travel to Europe this week "in an
urgent bid to secure gas for Gove" after failing to broker a
deal with three suppliers in Australia.
Australia has been increasing production of natural gas for
decades, but most is pre-sold to overseas utilities in Asia.
Mills was counting on a commitment from Santos and
GDF Suez, partners in the Bonaparte liquefied natural
gas project off Australia, to make gas available from two of
their fields, Petrel and Tern.
"We had a good discussion with the chief minister today but
made it clear, as we have previously, that gas from Petrel and
Tern is critical to the Bonaparte LNG project and is not
available for Gove," a spokesman for the two companies said.
A third potential supplier, Italy's Eni also was
unable to offer any assurances, according to an Eni spokesman.
"An aggregated gas supply must be found for the Northern
Territory and I remain determined to see this occur," Mills
Rio Tinto has joined rival BHP Billiton in
moving to sever unprofitable businesses as Australia's
decade-long mining boom comes to an end and commodities prices
Rio has been more specific than BHP, targeting $3 billion
per year of sustainable cost reductions post 2014, JP Morgan
mining analyst Lyndon Fagan said in a client report.
BHP is expected to report on Feb. 20 fiscal first-half
underlying earnings plummeted 42 percent to $5.7 billion
Rio is tipped to show a 40 percent fall in 2012 underlying
profits to around $9 billion when it reports on Feb 14.
Gove is the worst performer within the Pacific Aluminium
division, set up by Rio Tinto in 2011 to prepare 13 smelters and
alumina operations in Australia, the United States and Europe
for closure, sale or spinoff into a separate entity.
By some estimates, the refinery loses $30 million a month.
Rio Tinto on Jan 18 said it would write down between $10
billion and $11 billion for its aluminium business. At the same
time it replaced its long-running chief executive, Tom Albanese,