Rio Tinto has concluded a Heads of Agreement with Malaysian group Cahya Mata Sarawak (CMS), which paves the way for detailed feasibility studies on the smelter project. The companies plan to develop the scheme through a special purpose vehicle Sarawak Aluminium Company (Salco), which will be owned 60:40 in Rio Tinto’s favour.

It is expected that the detailed feasibility studies could be completed within 12-18 months and production to commence by late 2010. The initial production capacity of the smelter will be 550,000 tonnes per year but the scheme could be scaled up to 1.5M tonnes per year, Rio Tinto said in a statement.

The government of Sarawak state in Malaysia is looking to establish energy intensive industries in the region between Mukah and Similajau, where the smelter will be built. The region has significant potential hydro and thermal energy resources.