Rio Tinto Alcan in Retreat Despite Incredible Profits



    SAGUENAY, QC, May 13 /CNW/ - Rio Tinto Alcan (RTA) has undertaken a large
scale restructuring. However, as revealed by a detailed analysis conducted by
the CAW Research Department based on economic data provided by CRU,(1) Rio
Tinto Alcan's Canadian aluminum smelters are among the most profitable in the
world, even in the context of the current market lows.
    "The company's decision to retreat has nothing to do with the
profitability of its Canadian smelters. Rather, it can be blamed on the
massive debt incurred by Rio Tinto with its acquisition of Alcan in 2007,"
according to Alain Gagnon, president of SNEAA/CAW Local 1937, which represents
Rio Tinto Alcan workers at the Jonquière Complex in the Saguenay region. "The
Australian and British-owned multinational made this mega-deal using borrowed
money at a time when the price of aluminium was at an all-time high."
    "In this context, then, it is illogical and unacceptable for the company
to eliminate jobs and postpone investments," said CAW Quebec Director
Jean-Pierre Fortin. "The government of Quebec has entered into secret
agreements with RTA, among other things authorizing the company to close the
Beauharnois smelter in advance of the scheduled date. Because of the lack of
transparency of the Quebec government, the public is not aware of the terms of
these agreements. The government has a duty to disclose the details of its
negotiations with RTA."
    "With an additional loan of $175 million, the Quebec government must
demand that all work resume quickly on the AP50 project at the Jonquière
Complex. Finally, it must see to it that the staggering profits of this
company are not swallowed up by the debt of the parent company, but rather
that they are invested in the modernization of equipment and the creation of
jobs."
    The study conducted by the Canadian Auto Workers analyzes RTA's operating
costs, its gross profit margin in Canada and the value of the energy resources
it has access to. This analysis reveals that the company's business operating
costs among its Canadian smelters average US$1,388 per tonne, fully 15% lower
than the global industry average and 24% lower than the industry in China.
    "For the first time the public is getting a look inside the highly
advantageous business conditions enjoyed by Rio Tinto Alcan in Canada," said
Bill Murnighan, CAW researcher and author of the report.
    The study demonstrates that all of the company's Quebec smelters, as well
as the Kitimat facility in British Columbia, are profitable. Even the
Beauharnois smelter, which the company announced it was closing in January,
generated strong profits over the last two years. Forecasts show that this
plant, despite its outdated equipment, would be profitable again in 2010.
    The study also reveals that the company's access to extremely low-cost
power gives it a key advantage. Indeed, the company generates much of its own
power in facilities that escaped the nationalization of Quebec's hydroelectric
power network in the 1960s. In its smelters where power is not self-generated,
the company enjoys special rates consented by Hydro-Québec to large power
customers (known as the "L" rate).
    Thanks to its access to self-generated power, the company pays only
one-quarter the price paid for energy by other aluminum producers in Quebec,
and one one-sixth the global industry's average price. The value of this
access to self-generated power is estimated to be upwards of $680 million per
year.
    "Government energy policies are key to the success of this industry and
must ensure that use of our natural resources results in continued investment
and support for good jobs," said Rick Belmont, local union president at the
company's Kitimat operations in British Columbia.
    According to Mr. Gagnon, Mr. Fortin and Mr. Belmont, the lessons to be
drawn from this situation are that "government regulation and oversight of
foreign takeovers involving industries that rely upon publicly owned
hydro-electric resources must ensure that there are strong safeguards
governing continued production and future investment, as well as guarding
against market distortions caused by the potential of power re-sales."

    
    Source:  National Automobile, Aerospace, Transportation and General
             Workers Union of Canada (CAW-Quebec-QFL)

    ------------------------------
    (1) CRU is the leading authority for the world of metals and mining,
    power and cables, fertilizers and chemicals (see www.crugroup.com). The
    group's Primary Aluminium Smelting Cost Service and related reports are
    the industry benchmark for comparative competitive analysis, regularly
    relied upon by major aluminum producers including Rio Tinto Alcan (for
    example, see the November 11, 2008 presentation of Tom Albanese to the
    Deutche Bank Mining Conference, and the October 15, 2008 presentation of
    Dick Evans to the London Investors Meeting at
    http://www.riotinto.com/shareholders/speeches.asp).
    




For further information:

For further information: Alain Gagnon, President, CAW Local 1937, (418)
548-4667; Bill Murnighan, National Representative, CAW Research, (416)
816-3675; Rick Belmont, President, CAW Local 2301, Kitimat, BC, (250)
632-4611; André Leclerc, TCA-Québec Communications, (514) 349-9864,
solidaricom@yahoo.ca

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