Rio shifts gears on Kitimat

ANDY HOFFMAN
Globe and Mail
October 23, 2008

The board of Rio Tinto PLC has delayed giving final approval to a $2.5-billion (U.S.) aluminum smelter expansion in Kitimat, B.C., and has instead committed an additional $300-million to advance the project while it assesses the impact of the commodities crash.

Rio Tinto, which paid $38.1-billion for Montreal-based Alcan Inc. last year, had planned to make a decision on the project by the end of the month. But the vicious downturn in metals prices forced the company to announce last week that it is reviewing all of its capital expenditure projects, including those in Canada.

Jacynthe Cote, president of Rio Tinto Alcan's primary metal operations, said the new funds will be used to move the Kitimat project forward.

"We want to be flexible. The decision was made more than a week ago. We want to continue to progress the project at very good pace and that is what we are doing," she said.

The price of aluminum has declined by more than a third in the past three months and hovered near a three-year low yesterday. Aluminum fell as much as 4.8 per cent to $1,976 a tonne or 89 cents a pound on the London Metal Exchange.

The $300-million, which brings total investment in the project to $520-million, will fund activities at Kitimat well into 2009, Ms. Cote said.