Rio Tinto’s Africa Aluminum Smelter Project Still On Track

SYDNEY -(Dow Jones)- Rio Tinto Ltd. (RTP) said Friday its US$2.7 billion Coega aluminum smelter in South Africa was still on track, despite comments from power company Eskom that Coega’s supply needs to be reviewed.

Rio Tinto bought the project via its US$38.1 billion takeover of Alcan last year, which is scheduled to produce 720,000 metric tons aluminum a year. Alcan signed a long-term supply deal with state-owned Eskom in 2006.

"Eskom has assured us that it will respect the terms of the (electricity supply) contract, and we view them as a reliable long-term supplier. We receive regular updates from them," a Rio Tinto spokeswoman said.

A South African newspaper report Thursday quoted Eskom’s finance director saying that the supply agreement for Coega would need to be reviewed.

The company has struggled to meet electricity demand on a number of occasions, resulting in power outages across the country last year and reduced supply to existing smelters in the region, such as BHP Billiton Ltd.'s Hillside and Bayside smelters.

Aluminum smelting consumes vast amounts of energy, making electricity supply the key factor for new projects.