Chinalco deal must include building a new refinery

FEDERAL and local politicians weighed in on the proposal by Chinese aluminium giant Chinalco to defer a stand-alone alumina refinery in Queensland.They called for Treasurer Wayne Swan to either kill off Chinalco's $US15.9 billion rescue deal with debt-strapped mining giant Rio Tinto - or put significant conditions on it.Queensland Nationals Senator Barnaby Joyce said the suggestion that Chinalco subsidiary Chalco wanted to shelve a greenfields refinery near Bowen was a sign of things to come if the Chinalco-Rio deal proceeded.Senator Joyce has led a vocal campaign against the proposed Chinalco investment in Rio, arguing it had implications for Australia's sovereignty."If they can get out of building a refinery at Bowen then what else will they do?" he said."Possibly the only way you'll get around it is if the deal doesn't go through."Whitsunday Regional Council Mayor Mike Brunker wasn't as blunt but called on Mr Swan to make building a stand-alone refinery a condition of any approval of the proposed Chinalco-Rio deal."Wayne Swan should make it a condition of the Rio deal.

They should not be allowed off the hook," he said.Mr Swan's office would not comment on this yesterday.Chalco was named preferred bidder by the State Government back in 2006, beating 10 international companies vying for rights to mine 650 million tonnes of bauxite at Arukun in Cape York.The following year it got the green light from the Government to start a $40 million feasibility study into a proposed mine near Aurukun and an alumina refinery somewhere in Queensland.Last year Bowen appeared as the frontrunner, ahead of Townsville and Gladstone, as the preferred site for refinery, which was expected to create 2300 jobs during its three-year construction and more than 600 permanent jobs after completion.Premier Anna Bligh confirmed this week that Chalco had suggested to the Government that, for the time being, a stand-alone refinery be shelved.Instead Chalco proposed trying to facilitate the Stage 11 expansion of Rio's Yarwun refinery at Gladstone, a much cheaper option.Rio put the $1.8 billion Yarwun expansion on the backburner earlier this year as it slashed development plans, and jobs, under the weight of its huge $US38 billion debt mountain.

The Premier said she wasn't keen on the deferral - though she understood the international aluminium market had changed significantly since Chalco was awarded the rights to develop Aurukun on Cape York.Chinalco sources said yesterday no firm decisions had been taken, with the feasibility study on Aurukun not due to be completed until August-September.But with the international aluminium market in a parlous state given the global economic crisis, analysts suggest the Government might be better off to favour Yarwun, with Bowen likely many years away.That will put pressure on the Government, desperate for jobsto be created short term, tolook seriously at the Yarwun II proposal.Meanwhile, Roger Leaning, ABN Amro Morgans head of research in Brisbane, said there could well be further aluminium industry development longer term and pointed to Queensland's coal seam gas reserves, along with plentiful coal, as likely to provide competitive power supplies, the lifeblood of the industry.

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