There is new speculation over the future of the Rio Tinto Alcan-Cahaya Mata Sarawak joint venture aluminium smelter plant project in Bintulu following latest reports the Australian partner is cutting thousands of jobs and selling assets to reduce its burgeoning debt.

Under an initial agreement called Heads of Agreement signed in August 2007, Rio Tinto, one of the largest mining companies in the world, is to hold a 60% equity in a joint venture company with the CMS Group of Sarawak which holds the rest to undertake feasibility studies on the construction of a US$3 billion plant with a production capacity of 550,000 tonnes per annum.

bintulu similajau sarawak aluminium smelter plant The joint venture company Salco Sdn Bhd has already started feasibility studies on the highly-controversial aluminium smelter project, which plans to utilise hydro-power from Bakun and Murum in the central Sarawak region.

There has been strong local opposition, including environmental groups, to the project largely due to two major reasons - the displacement of more than 1,000 Penans following the proposed construction of the Murum dam and health hazards caused by the plant itself.

Local officials connected with Rio Tinto would not be drawn to comment on the latest publication of the Australian newspaper The Age report that Rio Tinto is to reduce its US$38.9 billion debt pile by a further US$10 billion by the end of 2009 through assets sales, job cuts and a reduced operating budget.

News of Rio Tinto’s 14,000 jobs slash was carried in the Australian media and picked up by the local press, as the Australian-based mining company with global operations is known to have entered an agreement with Chief Minister Abdul Taib Mahmud’s family-controlled business group CMS to build the smelter plant in Similajau, just outside Bintulu - Malaysia’s LNG producing centre.

Rio takeover withdrawn

The Sarawak government is counting heavily on energy-intensive industries such as aluminium smelters for its two major hydro-power plants - one at Bakun and which is due for completion in a year or two, and the other at Murum which is likely to start work early next year.

Last month, BHP Billiton, the world’s biggest mining company, decided to withdraw its US$64 billion takeover bid of Rio Tinto due to present market conditions.

Industry observers are not certain how the BHP Billiton’s decision is going to impact on Rio Tinto’s new projects overseas, including the smelter plant in Bintulu.

It is, however, believed that a delay may be inevitable, particularly since the focus of attention now is on reducing its huge debt pile.

PKR Stampin division chairperson See Chee How, a lawyer acting for the interests of the Penan affected by the Murum dam project, said the Sarawak government should review both the proposed smelter plant and the dam project.

“We are not against economic development and progress but before any project proceeds, proper studies must be carried out and the interests and welfare of every community must be looked after first,’ he said, adding that certain vested groups are too much in a hurry to do it.

He said that as far as he is aware even the environmental impact studies have yet to be approved to be released for public comments and scrutiny.

“I understand the social impact aspect of the studies has been poorly undertaken,” See added.