By Souhail Karam
UPDATE 1: UK firm says it is unable to finance 49% stake in aluminium joint venture amid global crisis.
Mining giant Rio Tinto is unable to finance its 49 percent stake in an aluminium joint venture in Saudi Arabia, projected to cost $10 billion because of the global crisis, its Saudi partner said on Wednesday.
"Rio Tinto... will not be able to participate in the capital of Maaden's integrated aluminium project," Saudi Arabian Mining Co, also known as Maaden, said in a statement posted on the bourse's website.
Maaden holds the remaining 51 percent in the capital of AlumCo, the company formed with Rio Tinto to develop the 740,000 tonnes per year aluminium smelter using bauxite from Saudi mines.
Dick Evans, the Chief Executive of Rio Tinto's aluminium business Rio Tinto Alcan, attributed the decision to the global financial and economic crisis, Maaden said.
"His (Evans') company will continue cooperation instead of owning a stake in the capital of the project," Maaden said.
Rio Tinto will continue to work with Maaden on the project by providing technical and advisory support in line with agreements signed by the two firms, Maaden said.
The agreement provides for the exchange of employees, the possibility of temporarily providing the smelter with alumina and the commercialisation of aluminium, it added.
Maaden is now looking into options to reduce cost, it said.
"We now can reconsider the project's criteria in the light of the current global financial crisis," Maaden Chief Executive Abdullah Dabbagh said in the statement.
Maaden is investing 60 billion riyals ($16 billion) in projects including phosphate, bauxite, gold and industrial minerals. The investments are a crucial part of government plans to diversify an economy heavily reliant on oil export income.
Maaden said in July the venture was still viable despite a 40 percent increase in costs.
In August, Dabbagh was quoted as saying the group planned to borrow as much as $8 billion in the third quarter of 2009 to finance the project.
Rio Tinto has said it has put on hold its aluminium smelter project in neighbouring Abu Dhabi, pending a review by the Gulf emirate's government of its energy requirements. (Reuters)