Eskom Acting Chairman, Mpho Makwana, explains: “The agreement, effective 31 March 2010, removes the impact of embedded derivatives on Eskom’s balance sheet, as well as all onerous conditions.  This amended agreement is also an important step in ensuring that both Eskom and BHP Billiton continue advancing the growth and development of southern Africa. We commend BHP Billiton for this unprecedented step on signing the amended Mozal contract, which shows their commitment to South Africa and the SADC region.”

Whilst discussions relating to the South African smelters are continuing over the coming months, the BHP Billiton smelter contracts at Hillside and Bayside in Richards Bay will remain firm and binding. Eskom will maintain its interruptibility at the smelters in line with the provisions of the contract.

Xolani Mkhwanazi, BHP Billiton Chairman, said: “BHP Billiton remains acutely conscious of the electricity supply challenges facing South Africa and the region and has been exploring innovative and sustainable solutions to these challenges. With the announcement of the amended Mozal agreement, Eskom and BHP Billiton remain confident that, given the necessary time and commitment, innovative and mutually beneficial solutions will be found for the South African smelters. The smelters continue to make an important contribution to the South African economy and at present continue to fulfil a commitment to a 10% power reduction. Eskom’s success is our success and we will continue to work with Eskom to address issues of common concern.”

The new pricing agreement will be submitted to the National Energy Regulator of South Africa for approval.

Following its introduction in Europe in 2005, the new proprietary ‘low-temperature oxyfuel burner process (LTOF®)’ — also known as ‘flameless burner’ technology — is achieving an average 30-50% higher melt rate and in some cases, a 100% improvement in melt rate, compared with conventional airfuel processes. Fuel consumption is reduced by up to 50%, flue gas volumes by up to 80% and dross formation decreased as a result of more uniform heating and melting. Carbon dioxide and sulphur dioxide emissions are also cut by up to 50% and nitrogen oxide emissions are virtually eliminated. The new system requires low maintenance, eliminating the need for a recuperator, electrical air blower or regenerative solution.

The Linde Group has more than 130 conventional oxyfuel installations in the European aluminium sector and has used this expertise to take heating technology to the next level. Sapa Heat Transfer, Sweden, a secondary aluminium melter, converted its conventional oxyfuel burners to LTOF® in mid-2005. The new technology has shown further improvements over the previous conventional oxyfuel system, including a 10% further increase in productivity, a 10% further reduction in fuel requirements, 9% less dross and 90% reduction in NOx emissions.

In February 2009, Stena Aluminium in Sweden, part of the Stena Metal Group, became the latest company in Europe to introduce the new burner technology. Stena produces aluminium alloys used to manufacture cars, trains, aircraft and ships and as raw material for steel mills.

Afrox’s applications engineer, Metallurgical Processes, Michael Hill, says that as in European installations, the new low-temperature oxyfuel burner process, suitable for both rotary and reverberatory furnaces, is capable of delivering real capacity increases in the South African aluminium sector, boosting productivity, saving energy and greatly mitigating environmental impact. It is also suitable for both primary and secondary smelters.

“Increasing the throughput of existing melting furnaces poses a real challenge for the aluminium industry,” says Hill. “Producers must continuously increase process yields, control fuel consumption and reduce emissions of greenhouse gases. In South Africa, the primary drivers are expected to be potential cost savings associated with reduced energy consumption, and reduced dross.”

“In reverberatory furnaces, power must also be controlled so as not to overheat the refractory ‘roof’ — or exceed furnace temperature set point. The new low-temperature oxyfuel burner process makes it possible to run the furnace at full power for longer, without exceeding roof temperatures. This is quite a breakthrough compared to conventional heating which requires the power to be reduced as soon as the maximum set point is reached, to avoid overheating.

“Another key benefit is that the reduced melting, holding time and uniform furnace temperatures prevent hot spots, significantly cutting down the formation of dross, while the improved heating capacity improves energy per ton of heated aluminium.”

Combustion occurs under a diluted oxygen concentration, by mixing the furnace gases into the combustion zone. This slows down oxyfuel combustion reactions and results in lower flame temperatures, comparable to those of airfuel technology, which are below the point at which thermal nitrogen oxide is created. Mixing the furnace gases into the flame also disperses energy throughout the entire furnace for uniform heating and more efficient melting. The dispersed flame contains the same amount of energy, but with a far more effective distribution. The overall result is more homogenous heating and melting, allowing not only for a higher power input and consequent higher melt rates, but also for reduced formation of dross and nitrogen oxide emissions.

Afrox is able to supply a commissioning and support package on a rental basis (including a nominal technology fee) for South African companies who introduce the new process.

“The new low temperature oxyfuel burner process is one of a suite of Linde furnace technologies available through Afrox, which include Universal Rotary Tiltable Furnace (URTF) technology and the proprietary Wastox® oxygen lancing, Airox® — which combines oxygen and air combustion — and the Flexflame™ variable flame oxyfuel burner,” says Hill.

Rio Tinto Alcan plans to implement further production curtailments to align production with customer demand. Further to curtailments which occurred in the fourth quarter of 2008, totalling five per cent of global production, Rio Tinto Alcan plans to reduce aluminium output by another 230,000 tonnes. This brings the total production decrease to 450,000 tonnes or approximately 11 per cent of its total annualised aluminium capacity.

There will also be a cost saving programme across all Rio Tinto Alcan regions. This is part of the global cost reduction programme announced by Rio Tinto in December 2008 as part of a series of Group wide initiatives aimed at reducing debt, conserving cash and preserving shareholder value.

“Our goal is to align production with customer demand and reduce our operating costs as much as possible. Increasing efficiency throughout our operations and streamlining our organisation will be crucial to achieving our objectives and preserving value for shareholders,” said Dick Evans, chief executive, Rio Tinto Alcan. “We are taking steps towards optimising our world class portfolio of low cost, long life assets, the majority of which are in the lowest half of the industry cost curve.”

As recently announced, Jacynthe Côté, who on 1 February 2009 will become chief executive of Rio Tinto Alcan, is in the process of carrying out a full review of Rio Tinto Alcan’s organisational structure and operating strategy in light of the current economic context. The review will be complete in early February.

Rio Tinto Alcan is taking steps to optimise its portfolio of assets to maximise cash preservation and strengthen the overall position of the business. Rio Tinto Alcan is also reviewing expenditures and reorganising operations at higher cost facilities.

Plans are in place to reduce the workforce by approximately 1100 roles (300 contractors and 800 employee roles). In addition, substantial cost reduction programmes are being implemented across all Rio Tinto Alcan facilities.

“We realise that the measures we’re announcing today will have serious impacts on our employees and local communities. The global economic downturn has meant that we must make difficult but necessary choices for our organisation, and we will make sure that those affected are treated with fairness and respect,” said Jacynthe Côté, president and chief executive officer, Primary Metal, Rio Tinto Alcan. “We will continue to honour our commitments to employees, customers, governments, communities, and other key stakeholders.”

Rio Tinto Alcan will continue discussions with all relevant stakeholders to assist affected employees through various support programs and in full compliance with the relevant Individual and Collective Labour Agreements.

Beauharnois smelter closure

The Beauharnois smelter in Quebec, Canada, which was commissioned in 1943 and employs 220 people, will cease smelting operations by the end of the second quarter 2009. The shutdown of its 52,000 tonnes of annual production will be completed safely in a controlled and gradual manner. The smelter uses Söderberg technology, which is to be phased out of all Quebec aluminium smelters by 2015 in accordance with environmental regulations.

Rio Tinto Alcan’s regional industrial development team will continue working with local stakeholders to support sustainable future industrial development and investigate business options for the facility, which could include continued casting activities.

Aluminium production curtailments

In 2008, Rio Tinto Alcan began a series of production curtailments at the Dunkerque (France), Lochaber (United Kingdom), Lynemouth (United Kingdom), and Saint-Jean-de-Maurienne (France) smelters and at its SORAL (Norway) joint venture. Further production curtailments will be progressively implemented at Saint-Jean-de-Maurienne.

Gradual aluminium production curtailments will also be implemented at selected smelters in the Rio Tinto Alcan network by temporarily not relining pots that come to the end of their useful life.

Bauxite and Alumina production curtailments

The Vaudreuil refinery in Canada will curtail its production of alumina by 25 per cent or approximately 400,000 tonnes. Similarly, as a result of current European market conditions for non-metallurgical grade alumina, Rio Tinto Alcan will curtail production at the Gardanne refinery in France by 15 per cent or approximately 105,000 tonnes. These production curtailments will result in a six per cent reduction of global annual capacity.

Also included in the total 11 per cent reduction in aluminium production capacity are the

following:

· Reduced capacity at Tiwai Point (New Zealand) due to equipment failure

· Reduced production due to energy supply issues at Alucam (Cameroon)

· The expected sale of Rio Tinto Alcan’s 50 per cent interest in an aluminium smelter in the Ningxia province of China

· As recently announced, due to unsuccessful power negotiations, the anticipated ending of smelting operations at Anglesey Aluminium Metal at the end of

September 2009 when its current power contract expires. Furthermore, the Centre de produits cathodiques in Jonquière, Quebec, Canada will reduce its carbon operations by 50 per cent and one of the seven anode baking furnaces at Aluchemie in the Netherlands will be shut down.