Russian aluminium giant Rusal resisting Rio Tinto’s move to push it out of Queensland Alumina
Russian aluminium giant Rusal says it ‘disagrees’ with Rio Tinto’s decision to force it out of management decisions at Queensland Alumina.
Russian aluminium giant Rusal says it “disagrees” with Rio Tinto’s decision to force it out of management decisions at Queensland Alumina, saying discussions about its role in the alumina refinery are continuing despite international sanctions.
Rio stepped in to take full control of QAL last week, using provisions in its shareholder agreement with Rusal to push its 20 per cent partner in QAL out of management decisions and ending the Russian company’s rights to its share of the refinery’s alumina output.
While the Australian government banned alumina exports to Russia in mid-March after Vladimir Putin’s invasion of Ukraine, Rusal is not the target of any direct sanctions and said in a statement it did not believe the current sanctions regime was enough to trigger the so-called “step in” provisions under the shareholder agreement.
Australia has slapped direct sanctions on oligarch Oleg Deripaska, who indirectly owns a big stake in Rusal, as well as a second indirect Rusal shareholder, Viktor Vekselberg.
QAL and Rio’s decision was based on legal advice suggesting QAL could be in breach of those sanctions if Rio did not step to assume full control of the company.
But Rusal said on the weekend it did not believe it was in breach of sanctions, and signalled a push to retain involvement in the management of QAL.
“The company disagrees that the operations of its subsidiary, Alumina & Bauxite Company Ltd, through which the company holds its stake in QAL, do not presently comply with the Australian government’s sanctions and disagrees with the decision made by QAL management that “step-in arrangements” under the joint venture terms have been triggered or that they are necessary,” Rusal said in a statement to the Hong Kong stock exchange.
“Discussions with QAL and Rio Tinto are continuing about the intent of the Australian government’s sanctions and ABC’s ongoing involvement in the operations of the Gladstone alumina refinery owned by QAL.”
It is unclear whether the shareholder agreement between Rio and Rusal would require a dispute over the use of the provisions to be sent to an arbitration forum, or whether Rusal intends to seek the intervention of the Australian courts to regain its rights at QAL.
“The company anticipates a successful resolution of the discussions with QAL and Rio Tinto and ABC resuming its participation in the operations of the Gladstone refinery,” Rusal said.
Rusal said it intended to remain a long-term investor in QAL, and signalled it had no intention of disrupting work at the Gladstone refinery as a result of the dispute, saying it “fully supports QAL’s objective of maintaining 100 per cent production capacity at the Gladstone alumina refinery while issues in respect to the operation of the Australian government’s sanctions are resolved”.
A longer-term dispute over the Rusal’s involvement in QAL could lead to difficulties for the plant and its estimated 500-strong workforce if the sanctions regime is not lifted, however.
The agreement between the two companies is renewed on an annual basis. If sanctions are not lifted by the end of 2022, allowing a new agreement to be signed, it would expire by May next year – potentially leaving QAL in legal limbo.
Rusal said the decision by QAL and Rio would have no immediate impact on its broader business aside from previous warnings it could incur additional costs from being forced to buy and transport alumina from other sources to its international aluminium smelters.
Rio is yet to respond to Rusal’s statement.
Last week, Rusal chairman Bernard Zonneveld in a strongly worded statement accused Russia of war crimes in Ukraine and called for an investigation.
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