Aluminium smelter may not close in 2024, briefing prepared for Ardern shows

Friday, 8 October 2021

For Southland aluminium has been more precious than gold.

Rio Tinto and senior government ministers have discussed changing the mining giant’s plan to close the Tiwai Point aluminium smelter in 2024, documents released under the Official Information Act show.

The smelter, which is majority owned by Rio Tinto, announced in January that it would continue operating until the end of 2024, after beating down Meridian Energy on the price it pays for electricity.

But the documents released under the OIA make clear that the date for closing the smelter, which currently employs about 1000 staff and contractors, is not “final”.

* Aluminium smelter issues assurance over clean-up after Government shelves talks

* 'It's a very profitable smelter now', Meridian boss says after price beat-down

Roger Neilson reminisces about his time at Tiwai. He was one of the first five apprentices at the New Zealand Aluminium Smelter in 1972.

Rio Tinto’s global head of aluminium, Ivan Vella, met with Finance Minister Grant Robertson, Energy Minister Megan Woods and Environment Minister David Parker in Wellington on May 6.

An ‘aide memoire’ drafted by Environment Ministry officials stated there was a discussion at the meeting “about changing the planned closure date from 2024”.

“Rio Tinto acknowledged a decision on final closure dates should come ‘soon’, but were not specific regarding the time frames,” the officials’ note said.

Ministers asked the company to come back with more information.

Days later, Prime Minister Jacinda Ardern met with Rio Tinto chief executive Jakob Stausholm, who subsequently wrote a contrite letter to Ardern, promising to rebuild a “collaborative and positive” working relationship with the Government.

What waste is being stored at Tiwai Point?

Aluminium prices have nearly doubled since April last year to trade at a near-record high of $2943 (NZ$4247) a tonne, fuelling speculation that Rio Tinto will seek a new power deal to keep the smelter open beyond 2024.

But the company has not encouraged that speculation by publicly acknowledging that has been a topic for discussion.

Asked for comment on the aide memoire, a spokesman for the smelter noted that its power-supply contract ends in December 2024.

“We have to plan and be ready to close at that time,” he said.

The major focus of at least the initial meeting between Rio Tinto and the Government in May appears to have been on arrangements for cleaning up the smelter site, with the company making several commitments.

These included promises to relocate and remove waste and to reduce its already-allowable discharges of cyanide into the marine environment to “world class levels”.

Stausholm said in his letter to Ardern that Rio Tinto understood it had to be better at listening to the communities in which it operated.

Rio Tinto chief executive Jakob Stausholm told Ardern the company had not done a good job of listening to the community and understood it had to do better.

“We did not do a good job of listening to our community regarding the Ouvea Premix waste, especially the material stored in Mataura and again I apologise for that,” he wrote.

“It did not belong to us, and we did not put it there. But it originally came from our operation and we should have done the right thing by removing the risk it presented to the community,” he told Ardern.

Stausholm was appointed chief executive of Rio Tinto in January, replacing former head Jean-Sebastien Jacques who left the company under a cloud – but still with a final year’s remuneration package of £13.3 million (NZ$26.1m) – following the company’s destruction of Aboriginal heritage sites in 2020.

The Government appears to have a strong environmental interest in ensuring that if an agreement is reached to keep the smelter open beyond 2024, that is confirmed as soon as practical and does not again go down to the wire.

That would be to ensure electricity generators know to invest in a sufficient amount of new renewable generation to match the higher levels of electricity demand that would then prevail.

Genesis Energy chief executive Marc England said in May that generators appeared to be investing on the assumption the smelter would stay open longer.

The aide memoire prepared for Ardern suggested ministers were wary of ongoing doubts over Rio Tinto’s intentions.

“Ministers asked that any decisions improve certainty for the market if at all possible,” it said.

High aluminium prices and the fact the smelter does not have the right to electricity beyond 2024 could put suppliers Meridian and Contact in a stronger negotiating position than they have previously been.

That is if Rio Tinto does opt to open talks on a new power contract and Meridian retains ownership of its Manapōuri hydro scheme.

The smelter is believed to have had a contract to source power at a price of about 5 cents a kilowatt-hour until 2030 before it exercised its right to terminate that contract in favour of a new agreement providing it with power at a price of about 3.5c/KWh until the end of 2024.

A spokeswoman for Meridian Energy indicated that as far as it was concerned, the smelter was still closing.

“As we’ve consistently said, the smelter owners and Meridian agreed a contract extension which will see the smelter exit New Zealand at the end of 2024. This is what we’re working towards,” she said.