The Rio Tinto Alcan smelter in Kitimat, which is undergoing a huge modernization project, is shown on April 9, 2014.John Lehmann/The Globe and Mail
Rio Tinto will pump another $1.5-billion (U.S.) into the aluminum smelter upgrade at Kitimat, B.C., increasing the total project cost to $4.8-billion, as the mining giant says it remains confident about long-term fundamentals about metal demand.
The London-based company announced Thursday that its board has approved a further $1.5-billion expenditure to complete the modernization. That's on top of $400-million that was previously allocated but unspent.
Rio Tinto Alcan's former chief executive officer, Jacynthe Côté, had said that difficulty in finding the right workers pushed the project off schedule and over budget.
There are about 1,100 employees at Kitimat and nearly 3,000 people working on the smelter upgrade, which is expected to start metal production in the first half of 2015.
Engineering, procurement and construction is 70 per cent complete but construction is only half finished, spokesman Bryan Tucker said Thursday.
The company announced in 2011 that it would upgrade the aging Kitimat smelter, boosting its aluminum production capacity by more than 48 per cent to about 420,000 tonnes per year.
Rio Tinto which reports financial results every six months, also said its net income increased 156 per cent to $4.4-billion for the first half of 2014. Underlying earnings increased 21 per cent to $5.1-billion or $2.77 a share for the six months ended June 30. That compared with $4.2-billion or $2.29 a share a year earlier. Revenues were $24.3-billion, down from $24.5-billion in the first half of 2013.
The company reduced operating costs by $3.2-billion, exceeding its $3-billion target six months ahead of schedule, while producing record volumes, said CEO Sam Walsh.
The number of employees decreased by 2,200, including 750 positions from divested assets. The company won't say how many of those job cuts were in Canada.
"We are confident Rio Tinto's low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years," he said in a news release.
Overall capital expenditures decreased 48 per cent to $3.58-billion as the company reduced its net debt to $16.1-billion. Full-year spending is expected to be around $9-billion, or $2-billion below its previous guidance.
The company took an $843-million impairment charge in the period, including $800-million related to Kitimat, plus an undisclosed amount from last November's closing of its smelter in Shawinigan, Que. The aluminium division has taken about $30-billion worth of writedowns following the untimely acquisition of Montreal-based Alcan for $38.1-billion in 2007.