Mining giant Rio Tinto eyes future for New Zealand aluminum

Global mining giant Rio Tinto's New Zealand subsidiary indicates that it plans to keep the country 's only aluminum smelter operating with a deal to purchase electricity beyond 2017.

Meridian Energy, a state-controled power generator, announced Monday that it had signed an electricity agreement with New Zealand Aluminium Smelters Ltd (NZAS) following extended negotiations.

NZAS was committed to buying 572 Megawatts of electricity from Meridian to run the smelter at Tiwai Point, in the far south of the South Island, at full capacity, Meridian chief executive Mark Binns said in a statement.

Meridian was committed to cover Tiwai Point's electricity usage at current production levels through to 2030, but NZAS retained a right to terminate the agreement with 12 months notice from the start of 2017.

NZAS had warned that the Tiwai Point smelter, which consumes 14 percent of New Zealand's electricity could close if it was unable to renegotiate an electricity agreement with Meridian Energy.

The pay-out was made as the government sought to bolster a partial sell-down of Meridian and was condemned as corporate welfare, but the government this time ruled out any payments.

Opposition lawmakers welcomed the news that the smelter, which employs 800 people will remain open, but they called for a development strategy to cover the company's eventual exit.

"The lower New Zealand dollar has improved the smelter's financial position on the international market and a deal has been struck that will bring relief to the region," leader of the main opposition Labor Party Andrew Little said in a statement.

Labor and the opposition Green Party had condemned the government's previous payout as corporate welfare.

"Today's decision to postpone the smelter's closing date creates a window of opportunity to come up with a strong plan for a post-smelter future," Green Party energy spokesperson Gareth Hughes said in a statement.

"As long as New Zealand doesn't have a clear alternative jobs plan, foreign companies like Rio Tinto can hold us to ransom and demand huge subsidies to keep their New Zealand operations open."