Rio Tinto Share Price Up after Striking Deal with Meridian (ASX:RIO)

The Rio Tinto Ltd [ASX:RIO] share price was up 0.63% today after announcing they’ve come to an agreement with Meridian Energy.

At time of writing, Rio Tinto’s shares are trading at $120.42.

Deal keeps New Zealand’s Aluminium Smelter (NZAS) running until 2024

NZAS is the only aluminium smelter in the country, located on Tiwai Peninsula. It’s a joint venture between RIO, who has a 79.36% stake and Sumitomo Chemical Company Ltd who holds the remaining.

Rio Tinto announced last year it would be closing down operations in August because of high energy and transmission costs which made the smelter lose money.

The new power contract allows the smelter to remain in operation until 31 December 2024.

Rio Tinto Aluminium chief executive Alf Barrios had this to say:

We are pleased to have reached an agreement with Meridian Energy that will enable the Tiwai Point smelter to continue producing some of the lowest carbon aluminium in the world. This agreement improves Tiwai Point’s competitive position and secures the extension of operation to December 2024. It also provides Rio Tinto, the New Zealand government, Meridian, and the Southland community more time to plan for the future and importantly gives our hard-working team at Tiwai and our customers the certainty they deserve.

What could happen next?

It’s not the only aluminum smelter Rio has struggling from power costs. They have similar concerns with smelters in Tasmania, Queensland and NSW.

Last year, Australian Aluminum Council’s executive director Marghanita Johnson said, courtesy of the AFR , that ‘some of the highest energy costs in the world were crippling the industry in Australia, while high transmission costs had been a big factor in New Zealand.

But one solution that could play an important part in lowering energy bills could be renewable electricity.

In fact, a recent report by Institute for Energy Economics and Financial Analysis (IEEFA ) found that ‘instead of closing the smelters, the aluminium sector could move to low-cost, zero-emissions electricity and invest in plant upgrades to support demand response management, and profit from the long-term growth by value-adding in metals and industrial processing markets.

If you are interested in renewable energy, check out our free report ‘Renewables Revolution’, where we show you how you can take advantage of the renewables boom.

You can also check out our new service, New Energy Investor, where James Allen and I rummage the global markets in search of the most promising clean energy stocks.

For more information, click here.


Selva Freigedo

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

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