The Tiwai Point site has been operating as an aluminium smelter for 50 years. Photo / Supplied
The Tiwai Point site has been operating as an aluminium smelter for 50 years. Photo / Supplied
Rio Tinto has revealed there is more hazardous waste at the Tiwai Point aluminium smelter than previously thought, forcing it to raise the provision for cleaning up the contaminated site.
The added material was picked up in a routine audit, about five months after Finance Minister Grant Robertson wrote to directors of the smelter questioning the basis upon which they were preparing to cover the costs of closure and clean up.
The mining giant, which owns just under 80 per cent of New Zealand Aluminium Smelters (NZAS), said it estimated there were 217,000 tonnes of spent cell lining (SCL) on the site, about 20 per cent more than the amount previously reported.
While the material is mineral rich, it is also hazardous and costly to move.
"Independent auditors confirmed the adjusted totals following a survey of the Tiwai Point site as part of NZAS' annual financial reporting process," Rio Tinto said, adding that "financial provisions have been increased accordingly to ensure the responsible management of all material stored on site".
Previously, NZAS has had a provision in its financial accounts of $294 million for remediation, although the company has said the figure is not an estimate of the actual costs to clean up the site.
Documents released under the Official Information Act show Treasury advised the Government the cost of removing the SCL alone could cost $350m, although it is unclear what volume of waste the calculation was based on.
Negotiations between Rio Tinto and the Government, over a Crown payment in return for specific commitments to clean up, broke down in March, NZAS has subsequently committed to removing the material. It repeated the promise on Friday.
New Zealand's Aluminium Smelter chief executive Stew Hamilton. Photo / Gregor Richardson
"I want to be very clear that regardless of the amount, we remain committed to removing all of the material from the site to be recycled or disposed of safely and securely in accordance with modern standards," NZAS chief executive Stew Hamilton said.
"I am confident that our environmental monitoring systems give us ample warning of any issues and enable us to remediate or alter processes to halt any breaches becoming harmful," Hamilton said.
The Government spent months attempting to pin Rio Tinto down on its clean up plans for the smelter when it closes, dangling the possibility of a multimillion-dollar payment and then later appearing to issue a legal threat.
Prior to the election, Prime Minister Jacinda Ardern promised Labour would work with Transpower to ensure the smelter would remain open beyond August this year, even as officials were warning that a subsidy dressed up as a payment towards transmission costs ran the risk of encouraging other major users to also demand relief.
The talks appeared to make little progress, with officials claiming Rio Tinto's negotiators were making no concessions and were attempting to circumvent the negotiators, while Rio Tinto's then global head of aluminium complained that the government's negotiators did not appear to have a mandate, documents show.
Treasury also warned that there may be little to be gained from a deal as the smelter was unlikely to close. By late July, Treasury had told the Government that Meridian had offered, in its words, an "eye-wateringly good" offer for electricity.
By September, Treasury had obtained commercial advice which claimed that Tiwai Point was already likely to rank fifth in terms of the profitability of Rio Tinto's 13 smelters, and could improve to third based on Meridian's offer.
Eventually, Treasury advised the Government to write directly to the directors of NZAS to remind them of their legal duties, even though the move "could potentially be portrayed as an implicit threat from the Crown, reflecting heightened sovereign risk for businesses with overseas owners".
Robertson wrote to the directors at the start of December, pointing out his confidence "that the directors, the auditors and the shareholders of New Zealand Aluminium Smelters Limited fully understand their legal duties and obligations … in relation to closure and remediation, and will have appropriate measures in place to meet them in full".
Lawyers said the letter put all parties on notice of their obligations.
"The minister's letter is clearly intended to put legal pressure directly on directors, auditors and shareholders, beyond NZAS's own liability, to try to ensure there will be remediation," Wellington lawyer Michael Wigley said.
