Rio Tinto reveals $1.7b hit for Gladstone plants

Rio Tinto has wiped more than $1.7 billion off the value of its emissions-heavy alumina plants in Gladstone in its latest financial results. The mining company reported an underlying EBITDA across the group of $US11.7 billion ($AU17.3 billion) in its half year report, 25 per cent down on the same time last year, and underlying earnings of $US5.7 billion ($AU8.43 billion). The company noted lower prices, in general, for its commodities, in line with slowing global demand. A major item was a pre-tax impairment charge of $US1.175 billion - or about $1.74 billion in Australian dollars, mainly related to the company's alumina refineries in Central Queensland. The company cited the challenging market conditions facing these assets, together with an improved understanding of the capital requirements for decarbonisation and new Federal legislation that increased the costs for carbon emissions. Rio Tinto's Gladstone alumina refineries are responsible for more than half of the company's scope 1 carbon dioxide emissions in Australia. The Australian Parliament in March legislated to introduce a requirement for large heavy industrial carbon emitters to purchase carbon credits based upon their scope 1 emissions, with tighter caps for these emissions. "The challenging market conditions facing these assets, together with our improved understanding of the capital requirements for decarbonisation and the now legislated cost escalation for carbon emissions have been identified as impairment triggers," Rio Tinto stated. The pre-tax impairment charge of $US1.175 billion represents a full impairment of the property, plant and equipment at the Yarwun alumina refinery ($US948 million - or about $AU1.4 billion) and an impairment of $US227 million ($AU 336 million) for its share of the property, plant and equipment of Queensland Alumina Limited (QAL). For QAL, Rio Tinto said the recoverable amount (net present value of $US325 million/$AU480 million) was represented by future cash flows attributable to a double digestion project at the plant. This major capital project would improve the energy efficiency of the alumina production process and significantly reduced carbon emissions, the company said. "These cash flows have been risk adjusted to reflect the pre-feasibility study stage of project evaluation. If investment in the double digestion project was not approved, the post-tax impairment charge would be $US325 million greater and result in a full impairment of QAL." Rio Tinto said it was committed to the decarbonisation of assets to reduce scope 1 and scope 2 emissions by 50 per cent by 2030 and to net zero emissions by 2050 relative to its 2018 equity baseline.

Rio Tinto reveals $1.7b hit for Gladstone plants

Industry Queensland

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