Rio Tinto Alcan, a unit of Rio Tinto PLC (RTP), said Thursday it is moving ahead with plans to boost production at its aluminum smelter in Straumsvik, Iceland by investing $347 million to modernize the plant.

Rio Tinto Alcan is boosting capacity by 20% to around 230,000 metric tons of aluminum after securing a 26-year energy supply contract from Landsvirkjun, the Icelandic power utility, that will provide an extra 75 megawatts of power on top of its existing power contract. The new energy supply contract will start on Oct. 1, 2010 and expire in 2036.

"Expanding the production capacity at ISAL (the Icelandic aluminum smelter) is in line with Rio Tinto Alcan's strategy to develop our top-tier assets," said Jean-Philippe Puig, president at Rio Tinto Alcan for Primary Metal, Europe, Middle East and Africa.

Output is forecast to gradually increase from April 2012 and reach full output by July 2014. ISAL directly employs 450 people and spends approximately 1.5 billion Icelandic Krona ($12.7 million) in the country every month.

-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; alex.macdonald@dowjones.com
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