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Rio Tinto Alcan Curtails Production, Initiates Additional Cost Savings (posted 1/20/09)

January 20, 2009
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Rio Tinto Alcan plans to reduce aluminum output by another 230,000 tonnes, bringing the total production decrease to 450,000 tonnes, or approximately 11% of its total annualized aluminum capacity.

Rio Tinto Alcan plans to implement further production curtailments to align production with customer demand. Further to curtailments that occurred in the fourth quarter of 2008, totaling 5% of global production, Rio Tinto Alcan plans to reduce aluminum output by another 230,000 tonnes. This brings the total production decrease to 450,000 tonnes, or approximately 11% of its total annualized aluminum capacity.

There will also be a cost saving program across all Rio Tinto Alcan regions. This is part of the global cost reduction program 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,” said Dick Evans, chief executive of Rio Tinto Alcan. “Increasing efficiency throughout our operations and streamlining our organization will be crucial to achieving our objectives and preserving value for shareholders. We are taking steps toward optimizing 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 February 1, 2009, will become chief executive of Rio Tinto Alcan, is in the process of carrying out a full review of Rio Tinto Alcan’s organizational 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 optimize its portfolio of assets to maximize cash preservation and strengthen the overall position of the business. Rio Tinto Alcan is also reviewing expenditures and reorganizing operations at higher-cost facilities. Plans are in place to reduce the workforce by approximately 1100 roles (300 contractors and 800 employees). In addition, substantial cost reduction programs are being implemented across all Rio Tinto Alcan facilities.

“We realize that the measures we’re announcing today will have serious impacts on our employees and local communities,” said Côté. “The global economic downturn has meant that we must make difficult but necessary choices for our organization, and we will make sure that those affected are treated with fairness and respect. We will continue to honor 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 labor agreements.

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 of 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 aluminum 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.

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

The Vaudreuil refinery in Canada will curtail its production of alumina by 25% (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% (approximately 105,000 tonnes). These production curtailments will result in a 6% reduction of global annual capacity.

Additional details are available at www.riotinto.com or www.riotintoalcan.com.

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