Rio Tinto in Malaysian venture to build aluminum smelter

KUALA LUMPUR: Global miner Rio Tinto Ltd and Malaysian conglomerate Cahya Mata Sarawak signed a pact today to jointly build an aluminum smelter in Malaysia's eastern state of Sarawak. Production from the smelting plant on Borneo island will begin in the fourth quarter of 2010 with an initial annual output of 550,000 metric tons, rising to 1.5 million tons over time, the companies said in a statement.

Under the agreement, the companies will undertake a feasibility study to be completed in 18 months, the statement said. Rio will hold a 60 per cent stake in the venture to be known as Sarawak Aluminium Company. The remaining 40 per cent will be owned by Cahya Mata, in which the family of Sarawak Chief Minister Abdul Taib Mahmud is a key shareholder.

The smelter will be powered by the 2,400-megawatt Bakun hydroelectric dam due to be completed by 2010. "This is a very positive development for Rio Tinto Aluminium and an important step in our plans to develop new greenfield aluminum smelting capacity," Rio Tinto chief executive Oscar Groeneveld said in the statement.

The companies didn't reveal the cost of the project but said in the statement that it would represent one of the largest foreign investments in Malaysia, adding billions of USD to the economy and providing up to 4,700 direct and indirect jobs. Company officials couldn't be immediately reached for comments.