Paraguay signs MOU with Rio Tinto for aluminum smelter

Paraguay's government has signed an MOU with Rio Tinto's (LSE: RIO) aluminum product division Rio Tinto Alcan for the installation of a US$4.4bn aluminum smelter in the country. Conditions of the agreement include sustainability and environmental measures, according to a statement on the presidential website. "This is a historic decision because the preliminary agreement, subject to further studies and approval from congress, involves respect for the environment and the generation of jobs," President Federico Franco said. "Nothing is concluding today, we are laying out the roadmap," he said. NEXT STEPS Among the next steps could be a public referendum on the project's development, said Franco, according to local press. "A referendum could be held on the same day as the general elections, April 21, to determine whether or not the public wants a large factory in Paraguay," Franco was quoted as saying. Any agreement is still at a very early stage and the future of the project will not be decided in the near future, the president said. "This is not going to be defined during the time that I am president," Franco said, adding that the final decision will come from the new administration, set to take office on August 15, 2013. Furthermore, all of the negotiations will have to go through congress. In July, the Paraguayan government issued and signed a decree heralding the start of negotiations with Rio Tinto Alcan for the installation of the aluminum smelter. More recently, the IDB approved US$275,980 for continued support to the government on the conceptualization and development of an aluminum smelter in the country. While the IDB did not mention a specific project, Rio Tinto's is the only aluminum smelter endeavor in Paraguay. The company handed in a prefeasibility study to the government in April 2012, and studies for power supply, environmental impact and others are underway. The plant will be Rio Tinto's largest worldwide, with capacity to produce more than 670,000t/y.