Rio Tinto eyes 550,000 T Malaysia aluminium plant

KUCHING, Malaysia, Aug 7 (Reuters) Global miner Rio Tinto Ltd/Plc said today it was considering building a 2 billion dollar aluminium smelter in Malaysia, to boost production and cater to rising demand for the metal around Asia.

''This is a very positive development for Rio Tinto Aluminium and an important step in our plans to develop new greenfield aluminium smelting capacity'', Rio Tinto Aluminium Chief Executive Oscar Groeneveld said in a joint statement.

Even with current prices about 20 per cent below last year's record at above 3,300 dollar a tonne, aluminium demand has been surging, driven largely by China and other developing economies, resulting in new smelters sprouting around the world and existing smelters being expanded.

If the project in eastern Sarawak state on Borneo island proves to be feasible, production of an initial 550,000 tonnes a year would begin late in 2010, which could eventually be scaled up to 1.5 million tonnes, making it one of the world's largest aluminium smelters, Rio Tinto said in a statement.

Rio Tinto would develop the smelter as the major partner in a 60-40 joint venture with Malaysian construction firm Cahya Mata Sarawak Bhd, part-owned by the family of Sarawak Chief Minister Abdul Taib Mahmud.

The project is to be powered by the huge 2,400-megawatt Bakun hydroelectric dam, now three-quarters complete and due to be finished in 2010.

''We now have to enter into those discussions with the state and federal governments,'' Groeneveld told reporters when asked when power supply talks would begin.

The smelter will provide about 4,700 direct and indirect jobs and ''the opportunity to build an outstanding technical skill base for Malaysian nationals, while adding billions of dollars to Malaysia's gross domestic product,'' Groeneveld added in the statement.

Rio Tinto has made an agreed bid worth 38.1 billion dollar for aluminium maker Alcan Inc, a deal that would make it the world's biggest aluminium maker.

Alcoa, BHP Billiton and China's State Grid Corp. had also been reported to be interested in building the smelter in Sarawak.

Sarawak's chief minister said the state has room for two aluminium smelters as more power supply becomes available, adding that another proposal from a Malaysian-Chinese consortium remained on the table.

''After we have some experience with Rio Tinto, we will be dealing with them,'' Abdul Taib told Reuters, referring to the proposal by Malaysian tycoon Syed Mokhtar Al-Bukhary and a Chinese partner.

He said additional power supply could come onstream by 2013.

Shares of Cahya Mata were down 4.4 per cent at 2.80 ringgit by the midday break.

REUTERS RN SSC1315