Rio Tinto, Malaysian Firm Say Power Deal Signed -AFP

KUALA LUMPUR (AFP)-Global mining group Rio Tinto (RTP) and its local partner said Monday they had signed a deal with a Malaysian utility for power supply for a planned aluminum smelter on Borneo island.

Rio Tinto and Malaysia’s Cahaya Mata Sarawak last August proposed to build the $2 billion smelter, which could be one of the world’s largest, in the eastern Sarawak state.

Both companies signed a deal with state-owned Sarawak Energy Berhad to tap power supply of up to 1200 megawatts from Sarawak’s controversial Bakun Dam, involving an investment of MYR5.25 billion ($1.62 billion).

Activists have dubbed the $2.5 billion dam project as an environmental disaster after an area of rainforests the size of Singapore was inundated, forcing up to 10,000 tribal residents to relocate.

"Once developed, (the smelter) will represent one of the single largest foreign direct investments in Malaysia," Rio Tinto Alcan Senior Vice President of Business Development Sandeep Biswas said in a statement.

The proposed smelter, which will be known as the Sarawak Aluminium Company, would have a production capacity of 550,000 tons annually and expects to commence operation by the end of 2010.