JEDDAH, 4 June 2008 -- Rio Tinto Alcan's CEO Tom Albanese paid a one-day visit to Maaden mining group in Riyadh recently. This follows the signing of a multibillion joint venture agreement late last year to exploit the considerable bauxite deposits in the north of the Kingdom and to produce downstream alumina and smelted aluminium.
"I felt it was important for me to get out and see this project and talk to the people involved here," said Albanese in an exclusive interview with Arab News. After leaving the Kingdom, his next stop was Oman to see an aluminium smelter project.
His trip follows Rio Tinto's successful acquisition of Alcan last year and its incorporation into the existing aluminium business. Now Rio Tinto is the top player in smelted aluminium business. Albanese thought aluminium an excellent business to be in because of increasing demand from China. Rio Tinto Alcan is also the largest producer of bauxite and of refined alumina. The joint venture with Maaden mining group -- 51 percent Maaden and 49 percent Rio Tinto -- involves extracting bauxite, refining it to alumina and smelting it to aluminium.
"The deal is designed to exploit the world class bauxite reserves long known to exist in Saudi Arabia and to bring it into production," said Albanese.
Asked if there were other areas that attracted his interest, Albanese said that his priority was to take the current project, which had "a good head of steam behind it", and continue to progress it as it was. "Certainly during the course of this visit I have used the opportunity to engage with senior officials in some broader interests that we may have," he said.
Albanese has a geology background and an interest in a wide range of resources and exploration.
"I think there are opportunities for that and certainly this could be the start of a very long mutually productive relationship," he said. The first stage of the project is to produce about 740,000 tons of aluminum metal. The Saudi government hopes to see some of that metal going downstream but as Albanese pointed out this was not Rio Tinto's main business area. He did not however rule out some involvement with downstream activities and said that the Rio Tinto engineering group had considerable expertise and could provide a lot of assistance in that area.
"From the strategic point of view," he said, "At the smelting stage we already have molten metal. It is more effective to 'send it over the fence' to a downstream rolling mill for example rather than cooling that metal down and reheating it."
Since the signing last year in Riyadh a great deal of evaluation work and engineering work has been going on and Albanese hoped to be moving on the next stage in the coming months.
He noted that one of the more important early stages in development is the production of a power plant of 2,000 megawatts that uses heavy oil, part of the engineering and the long lead-time items that would proceed over the next few months. He hoped that the first metal would be produced in late 2011 or early 2012. Last week, Maaden announced that the total cost of the project, including power plant and mining, refining and first stage of smelting producing 40,000 tons a year, would be about SR37.5 billion ($10 billion).
Of primary importance in the competitiveness of aluminium metal on the world market is access to the bauxite and the cost of electricity. That, thought Albanese, was very much part and parcel of this joint venture. Part of the energy consideration was heavy oil but capital was needed to put in the requisite pollution control, scrubbing and environmental protections.
He agreed that availability of oil, cheap energy and short transport distances was "all part of the deal to make a competitive package against what we see as rising construction costs all over the world."
By Roger Harrison
© Arab News 2008
