Rio Tinto and Malaysian conglomerate Cahya Mata Sarawak Berhad (CMS) will jointly develop a world-class aluminium smelter in the Malaysian state of Sarawak.

An agreement between the two companies will enable detailed feasibility studies on the design, engineering, construction, commissioning and operation of the smelter to start.

The studies will take between 12 to 18 months to complete and will examine the technical, environmental, operational, social and economic aspects of a smelter development.

The initial participating interests in the project will be 60% Rio Tinto Aluminium and 40% CMS.

The smelter will be known as Sarawak Aluminium Company (SALCO) and will be in Similajau, 60km from Bintulu town. It will have an initial production capacity of 550,000 tonnes per year, with the capability to be expanded to 1.5 million tonnes. First production from the smelter is expected in the fourth quarter of 2010.

It is proposed that electricity for the smelter will come from the Bakun Hydroelectric Dam, which is under construction.

Rio Tinto Aluminium chief executive Oscar Groeneveld says: "This is a very positive development for Rio Tinto and an important step in our plans to develop new greenfield aluminium smelting capacity. We look forward to working with the Malaysian Federal Government and Sarawak State Government, and CMS on this project which has the potential to generate significant social and economic benefits for Malaysia and local communities in Sarawak.

"The smelter will provide about 1200 direct jobs and up to 3500 indirect jobs, and the opportunity to build an outstanding technical skill base for Malaysian nationals, while adding billions of dollars to Malaysia's Gross Domestic Product."