Rio takes full control of Rusal Gladstone refinery

Rio Tinto has taken over the Queensland alumina refinery that it owns with the Russian aluminium giant ‘until further notice’.

A general view of the Queensland Alumina Ltd in Gladstone that Rio Tinto owns with Russian aluminium giant, Rusal.

Rio Tinto has taken full control of the Gladstone alumina refinery it owns with Rusal, stepping in to take management control in the wake of sanctions affecting the Russian aluminium giant.

Rio’s decision to take direct control of Queensland Alumina Ltd (QAL) comes in the wake of the mining giant’s March promise to terminate all commercial relations with Russian companies in the wake of Vladimir Putin’s invasion of Ukraine, and in response to Australian sanctions affecting its Queensland business partnership with Rusal.

“Rio Tinto has taken on 100 per cent of the capacity and governance of Queensland Alumina Ltd (QAL) until further notice,” the mining company said in a statement.

QAL is 80 per cent owned by Rio Tinto and 20 per cent owned by Rusal. “Our focus remains on ensuring the continued safe operation of QAL, as a significant employer and contributor to the local Gladstone and Queensland economies,” Rio said.

The move by Rio cuts Rusal out of management decisions made at QAL while the sanctions remain in place, and strips the Russian company of any rights to the alumina it produces.

Rio Tinto, which is holding its annual general meeting on Friday, said last month that it would terminate all commercial relationships it has with any Russian businesses.

Rusal is yet to face any direct sanctions over Russia’s invasion of Ukraine, but Australia has slapped sanctions on oligarch Oleg Deripaska, who indirectly owns a big stake in Rusal, as well as a second indirect Rusal shareholder, Viktor Vekselberg.

The federal government also banned direct exports of Australian alumina to Russia on March 20. QAL is normally run by its own management company rather than being operated by Rio, and the mining giant lacks any obvious means of forcing Rusal out of the partnership if it is unwilling to exit voluntarily.

The step-in provisions exercised this week were negotiated after QAL ran into troubles when Rusal was last the target of international sanctions in 2018, when the US banned trading with the Russian aluminium giant over Vladimir Putin’s interference in the 2016 presidential election.

But, while negotiations between Rusal and Rio over possible use of step-in provisions are believed to have been ongoing since early March, they have been complicated by the lack of any sanctions directly targeting Rusal — a circumstance not foreseen when the partnership agreement was last renegotiated.

It is understood Rio exercised the provisions earlier this week after receiving legal advice that QAL could be in breach of the Australian sanctions regime if it did not do so. Rio can now make any necessary investment and spending decisions required at QAL without the involvement of Rusal, and will also be entitled to Rusal’s 20 per cent share of QAL’s output.

But the fix is only likely to buy Rio and Rusal a passage through a short-lived sanctions campaign, given agreement between the two companies is renewed on an annual basis. If sanctions are not lifted by the end of the year allowing a new agreement to be signed, it would expire by May next year – potentially leaving QAL and its estimated 500 employees in legal limbo.

Rusal is yet to comment on Rio Tinto’s latest moves, but its chairman Bernard Zonneveld in a strongly-worded statement has accused Russia of war crimes in Ukraine and has called for an investigation.

“Reports from the Ukrainian city of Bucha shocked us,” he wrote on the company’s website.

“We believe that this crime should be thoroughly investigated.

“We support an objective and impartial investigation of this crime and call for severe punishment for the perpetrators.

“No matter how hard it may seem in the context of an ongoing information war.”

Rio Tinto shares closed up 24c, or 0.2 per cent on Friday, at $118.98.