Rio Tinto announced that it would wind-down and eventually terminate its New Zealand Aluminium Smelters (NZAS) operation which posted an underlying loss of NZ$46m in 2019.
The announcement follows the the conclusion of its strategic review of the business which has shown that NZAS is no longer viable given high energy costs and a challenging outlook for the aluminum industry.
Rio Tinto said extensive discussions with a wide range of interested parties ‘have failed’ to secure a power contract that will enable the operation to become both competitive and profitable.
“As a result, NZAS has given Meridian Energy notice to terminate the power contract, which will end in August 2021, when the wind-down of operations is expected to complete,” the company said in a statement.
Rio Tinto Aluminium chief executive Alf Barrios said NZAS and Rio Tinto will work closely with partners during the next 14 months as detailed planning is undertaken to wind-down operations, and eventually close the smelter.
“We recognise the decision to wind-down operations at NZAS will have a significant impact on employees, the community and our customers,” Mr Barrios continued.
“It is not a decision we have made lightly and without significant careful consideration. It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business. We will therefore terminate the power contract and move to close the operation.
“We are committed to working with our partners as we progress through detailed planning towards closure and we will do all we can together with the government to find ways to support the Southland community.”
NZA, which employs around 1000 people directly and creates a further 1600 indirect jobs in Southland, is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%).