Rio Tinto to Review Saudi $10.6bn Aluminium Venture

Rio Tinto Alcan said on Monday it will review a $10.6bn aluminium joint venture with Saudi firm Maaden, and sources close to the project said it could be delayed by up to two years.

"We are looking at the technical and financial feasibility of all our projects, this is not unique to Maaden," Rio's CEO Dick Evans told Reuters at an industry conference in Dubai.

"The current global financial markets merit a pause to re-look at the long term planning for these projects to see how we can optimise them," Evans said.

A source working on the 740,000-ton-per-year smelter project said before Evans made his remarks that Maaden would push it through, with or without its partner, should Rio decide to drop the scheme.

Piers Taylor, a Maaden spokesman, could not immediately confirm if Rio Tinto is considering abandoning the plan.

A Khobar-based executive, overseeing Maaden's aluminium project, told Reuters on condition of anonymity that the project could be delayed by up to two years now that market conditions have changed.

"The board will decide within three weeks or before the end of this year at the latest if we should go for a one-year delay or two years," he said.

"The short- and medium-term situations both in the financial world and in the aluminium market call for greater caution on a project of this size."

But there is no doubt on the long-term viability of the project, he added.

Oil Reliance

Maaden is investing 60bn riyals ($16bn) in projects including phosphate, bauxite, gold and industrial minerals. The investments are a crucial part of government plans to diversify an economy heavily reliant on oil export income.

Maaden said in a statement it "is carrying out a detailed review of its aluminium project in the context of the current international financial climate".

"Maaden continues to work intensively on this process and once the review is completed will inform the market of any changes through the proper channels," it said.

Maaden chief executive Abdullah Dabbagh said in October all his company's projects will be reviewed because of the impact of the financial crisis but declined to give a time frame for decisions on the aluminium plant.

Maaden said in July the venture was still viable despite a 40% increase in costs. Dabbagh was quoted as saying in August the group planned to borrow as much as $8bn in the third quarter of next year to finance the project.

Last month, Rio's Evans said the company was planning to defer some growth projects and look for acquisition opportunities thrown up by the current market turmoil.

Evans said Alcan, one of the world's two biggest aluminium producers along with Russia's UC Rusal, was expected to see flat to slightly higher overall production in 2009.

Alcan had previously released a growth plan of new projects to boost output to around 7 million tons per year from current levels of around 4 million.

Rio Tinto has said it has put on hold its aluminium smelter project in neighbouring Abu Dhabi, pending a review by the Gulf emirate's government of its energy requirements.

By Luke Pachymuthu and Souhail Karam, Reuters.