Rio Tinto Alcan says Bluff smelter hurt by high kiwi, lower prices

Rio Tinto Alcan (New Zealand), which holds Rio Tinto's stake in the Bluff aluminium smelter, is mulling its response after losing an appeal against an Employment Court ruling over a claim of $13.4 million.

The company took provisions for its share of the claim in its 2013 accounts, of $10.6 million, according to its annual report. It turned a profit of $66.8 million, from a small loss a year earlier, when it took a charge as an impairment against the smelter. Sales fell 13 percent to $655 million, driven by revenue from related parties.

Production at the smelter itself barely budged at 324,835 tonnes of saleable metal in 2013, from 326,963 a year earlier, according to the financial accounts of the operating company, New Zealand Aluminium Smelters, of which Rio owns 79 percent. Revenue at NZAS rose 16 percent to $796.6 million, although this included accounting gains.

Operating revenue fell 7.3 percent to about $647 million. The unit's profit for the year was $90.5 million from a $1.1 million loss a year earlier.

In notes to the Rio holding company's accounts, it provides more narrative on the performance of the smelter. While the facility had benefited from renegotiation of its Meridian Energy supply contract and operating improvements, it had been "largely offset by a combination of low metal prices combined with a high New Zealand dollar." The result was a $44 million, or 6 percent, reduction in metal revenues.

The government's cash grant to the smelter of $30 million, announced in August last year, made only a minor contribution in the year of $7.5 million recognised as other income. The company is obliged to repay the outstanding amount if it announces a review of the smelter's on-going viability before June 30, 2015, buying time for an important contributor to the Southland economy. As a result of the deal the price it paid for power was held at pre-2013 levels in exchange for guarantees it would remain operating until at least January 2017.

The smelter has been knocked back by the Employment Court over its appeal against a Employment Relations Authority ruling on its interpretation of pre-2004 individual employment contracts.

"NZAS is still considering its position in relation to the latest decision," it said.

(BusinessDesk)