Uncertain future for Australia’s Gove alumina refinery

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Gove alumina Image credit: flickr.com User: hug_em_

The future of loss-making Gove alumina refinery in Australia is in the hands of Rio Tinto. The refinery is the biggest employer on the Gove Peninsula, about 650 km (400 miles) east of Darwin.

Gove alumina refinery Image credit: flickr.com User:  hug_em_
Gove alumina
Image credit: flickr.com User: hug_em_

According to an article on Reuters, the company is reviewing the future of the refinery in light of worsening market conditions.

Rio Tinto already revealed that it had made the decision not to convert the plant to use gas-fired power.

“Despite considerable efforts to improve the refinery’s performance, continuing low alumina prices, a high exchange rate and substantial after-tax losses for the refinery are key factors under consideration,” said a spokesman for Rio Tinto.

Gove alumina is part of the Pacific Aluminium business that Rio Tinto failed to sell and reintegrated into the company last August.

Rio Tinto said it would still mine bauxite at Gove alumina no matter what happens to the refinery. Bauxite is refined to produce alumina, which is then processed to yield aluminium.

The company reportedly produced 1.6 million tonnes of alumina in the first nine months of this year at Gove. The numbers are down 22% from the same period in 2012.

As far as bauxite is concerned, the company produced 5.8 million tonnes of bauxite, which is down only slightly from the same period last year.

Rio Tinto had arranged a deal with the Australian and Northern Territory governments earlier this year in order to secure gas supplies for the plant and replace the more expensive diesel with the help of a state-subsidized pipeline.

However, a new territory chief minister cut the amount of gas intended for the plant last July. The minister wanted to ensure that taxpayers in the Northern Territory would not face potential energy shortages and higher power bills, but the decision resulted in Rio Tinto’s deal falling through.

Rio Tinto announced last Thursday that the federal and territory governments can no longer take the necessary steps needed to support the business case for using gas.

Further, the company plans to consult its 1,400 workers and the local community in the coming weeks and that the final decision will be revealed as soon as possible.

Rio’s shares dived 0.6% to A$65.03, slightly underperforming the materials sector.