- Rio Tinto (RIO) will close its Tiwai Point smelter in New Zealand, terminating its power contract with Meridian Energy (MEZ)
- Meridian currently supplies the power for the smelter
- The mining giant plans to close the smelter by August next year, putting 1000 people out of a job
- The decision follows a review which indicates the business is no longer viable due to high energy costs and a challenging outlook for the aluminium industry
- In 2019, the smelter had an underlying loss of NZ$46 million (approximately A$43 million)
- On the market today, Rio is up 3.21 per cent and is trading for $98.61 per share, while Meridian Energy is down 6.33 per cent, trading for $4.59 each
Rio Tinto (RIO) will terminate its contract with Meridian Energy (MEZ) as it plans to close the Tiwai Point smelter in New Zealand.
The mining giant warned of the closure to Meridian this morning, which will see 1000 people lose their jobs. Meridian supplies the power for the smelter.
The power contract between the companies will be terminated on August 21, 2021.
Meridian says it will review the decision and work with Rio to assist in the exit from New Zealand.
Rio will start winding down operations at its New Zealand Aluminium Smelters (NZAS) as it aims for closure next year. This follows a strategic review, which has shown the business is no longer viable, due to high energy costs and a challenging outlook for the aluminium industry.
NZAS is a joint venture between Rio and Sumitomo Chemical. It employs 1000 people directly and creates a further 1600 indirect jobs.
The smelter in New Zealand’s South Island is the largest consumer of electricity in the country. In 2019, the smelter had an underlying loss of NZ$46 million (approximately A$43 million).
Over the next 14 months, NZAS and Rio Tinto will work closely with partners to create a detailed plan for the shut-down.
Rio’s Aluminium Chief Executive, Alf Barrios, recognises the closure will have a significant impact on employees, the community and customers.
“It is not a decision we have made lightly and without significant careful consideration,” he said.
“It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business. We will, therefore, terminate the power contract and move to close the operation,” he added.
The closure is a massive blow to the economy in New Zealand as it begins to recover from the COVID-19 pandemic.
In 2013, the smelter received a $NZ30 million (around A$28 million) bailout from the government, as long as Rio keeps it open for another four years. However, the government has since said it will not offer more financial support.
On the market today, Rio is up 3.21 per cent and is trading for $98.61 per share, while Meridian Energy is down 6.33 per cent, trading for $4.59 each at 12:30 pm AEST.