Rio Tinto Alcan to expand Canadian smelters

CEO Alfredo Barrios says investment awaiting a rebound in aluminium prices.

February 19, 2015

MONTREAL — Rio Tinto Alcan plans to expand its smelting capacity in Canada once the fragile aluminum market gains strength, the mining giant’s CEO said.

Alfredo Barrios says aluminum prices, which have retreated since rising last year, are not encouraging investment at the moment because of excess smelting capacity.

But strong long-term fundamentals, including demand expected to grow through 2025 in part from the automotive sector, should eventually encourage new investments.

“If the market starts improving and the returns start remunerating the investments then there are a number of projects that we have across the world, even in Quebec, to potentially grow,” Barrios, who took the helm last June, told reporters.

He pointed specifically to a new Alouette smelter and expansion of its AP60 pilot project in Quebec.

“When the moment is right, Quebec is a clear place where we will be investing in smelting. That is where our core smelting business is.”

However, the 48-year-old former oil executive wouldn’t say how long it could take before these new projects could be built.

Barrios said Rio Tinto Alcan has been the only aluminum company outside of China and the Middle East to have invested heavily in recent years despite weak market conditions and low prices.

It spent more than US$7.5 billion in Canada over the past five years, including US$4.8 billion to modernize a smelter in Kitimat, BC, that is set to open in the coming months.

While the aluminum sector is expected to remain volatile over the next couple of years, the company plans to focus on improving productivity and reining in costs, although Barrios did not give details.

Earlier, Barrios told the Montreal Board of Trade that decisions by his predecessor, Jacynthe Cote, to sell or close 25% of the company’s global smelting capacity had put the division on a surer footing and helped it to generate free cash flow for the first time since 2010.

Aluminum was Rio Tinto’s most improved sector last year, with underlying earnings increasing 124% to US$1.25 billion. However, iron ore remained by far the most important division, accounting for 87% of Rio’s profits.

Rio Tinto employs 13,000 people in Canada, while the aluminum division has about 18,000 in 27 countries, down from 21,000 three years ago.

© 2015 The Canadian Press

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