Rio Tinto South African Aluminum Smelter Project Proceeding

JOHANNESBURG (Dow Jones)-Rio Tinto PLC’s (RTP) planned $2.7 billion aluminum smelting complex in South Africa is proceeding on schedule, although the company is in regular talks with the state power company regarding the supply of electricity for the proposed plant, a company spokesman said Tuesday.

Rio Tinto "clearly is looking for guarantees on power supply and will have ongoing negotiations with Eskom," spokesman Nick Cobban told Dow Jones Newswires, adding that as recently as last Thursday the utility said it would honor the terms of a supply agreement.

The Coega project outside Port Elizabeth, inherited with Rio Tinto’s acquisition of Canada’s Alcan, will need board approval in order to proceed. A board review of the project is expected about midyear, Cobban said.

Eskom in November 2006 said it had agreed a multibillion rand power supply deal with Alcan for the project in the Eastern Cape province. The Johannesburg-based utility said it would be investing about 6.4 billion rand ($898 million) on high-voltage transmission infrastructure in order to supply power for the smelter under an agreement that would see it supply 1,300 megawatts of power over 25 years.

South Africa has in recent weeks seen an escalation in rolling blackouts by Eskom, which culminated ahead of the weekend in a shortage of available power that forced underground gold, platinum and diamond mines to suspend operations. The utility has seen its excess generating capacity exhausted by a steady rise in demand for electricity driven by South Africa’s booming economy.