As Rio Tinto's strategic review of its New Zealand operations inches towards completion, analysts seem to be firming behind the view that it is unlikely to close, while one investment bank is promoting its products.
In October Rio Tinto announced it was seeking talks with the Government as it warned it could close the Tiwai Pt aluminium smelter , of which it owns about 80 per cent.
Stew Hamilton, the chief executive of New Zealand Aluminium Smelters, warned the company needed "tens of millions" in relief from both lines charges and electricity prices to keep the operation viable.
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Rio Tinto expects to provide an update on the review by the end of March, but analysts seem increasingly skeptical that the operation will close.
"We are calling Rio Tinto's bluff that closure of its NZAS aluminium smelter at Tiwai Pt near Bluff is imminent without more favourable terms," Forsyth Barr Andrew Harvey-Green wrote in a note to clients yesterday.
"Fundamentally its actions make little sense in the context of climate change and minimising carbon emissions."
While Harvey-Green acknowledged that the cost of producing aluminium at Tiwai Pt were high relative to other smelters around the world, the premium it gets from the premium products it sells mean it is likely to be viable.
Because the smelter is powered entirely by hydro-electricity from the nearby Manapouri Power Station, Tiwai Pt's future would be secured if a global price was placed on carbon, Harvey-Green said.
He suggested the approach taken by the smelter's owners, to set public deadlines with warnings of imminent closure, may be tactical.
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"If a sale was going to take place and you were looking at maybe getting slightly better value for the smelter, Rio's the only one who can really do it," Harvey-Green said.
"A new buyer wouldn't be able to approach Meridian within five years, I would have thought, and plead poverty, given they've just paid a reasonable price, presumably, for the smelter."
Because Rio Tinto is liable to remediate the site of the smelter once it closes, Forsyth Barr said it would be arguably be better to pay someone $200 million to take the operation off its hands, rather than close it.
Today investment bank Macquarie will host a conference call on the smelter for institutional investors.
While the viability of Tiwai Pt is an important factor for investors in New Zealand's electricity companies, the invitation read like a promotion of NZAS' products, sparking speculation that Macquarie may be attempting to line up a buyer.
"The call will focus on the smelter's unique, high-purity production position, typical end uses for these grades and the premium it receives over LME benchmark pricing," Macquarie said.
The briefing, including input from international aluminium experts, would cover new technologies which could allow smelters to be more reactive to fluctuations in electricity production and to reduce emissions in the smelting process.
A spokeswoman for NZAS refused to comment on Macquarie's call. "We don't comment on other people's business."
Stephen Hudson, a New Zealand-based analyst for Macquarie Securities, said the call was to brief institutional investors and was "not a [Rio Tinto]-mandated briefing of any kind".