Century Aluminum looks to mine the other Congo

With many experts predicting that 2007 will be aluminums turn in the high commodity price cycle, Century Aluminum (CENX- Q) is considering taking on more political risk to increase its production.

The Monterey, California-based company signed a memorandum of understanding with the Republic of the Congo (ROC) for the exclusive right to develop an aluminum smelter, an alumina refinery and a bauxite mine.

Century currently has a 100% interest in three operating aluminum facilities two in the U.S. and one in Iceland, and has roughly a 50% stake in the Mt. Holly facility in South Carolina. It also holds a 50% interest in the St. Anne bauxite mine in Jamaica, which produces 4.5 million dry tonnes of bauxite a year.

For the first nine months of 2006 the period of its most recent reporting the company shipped just over 1.1 billion lbs of aluminum.

The ROC’s port city of Pointe Noire is being targeted as the potential site for the smelter and refinery, while the location of the bauxite mine is yet to be determined. The company says it will first have to assess bauxite reserves in the country.

The ROC is lead by President Denis Sassou Nguesso who is also the current head of the African Union. A former Marxist, Sassou Nguesso returned to power in 1997 promising reform and democracy — but his re-instatement brought a period of ethnic and political unrest that was only settled by a peace accord signed with rebel factions in 2003.

Onlookers still describe the relative peace in the country as tenuous as refugees continue to present a humanitarian crisis.

London-based risk consultants, Control Risk, gives the ROC a “low” security risk rating, and a “medium” political risk rating.

By way of comparison its neighbour to the east — the Democratic Republic of the Congo (DRC) — scores an “extreme” security risk rating in certain areas and a “medium” political risk.

On the economic side, the ROC has had little investment on the mining front. The country was once one of Africa’s largest petroleum producers, but is in need of new offshore discoveries to stem declining production.

ROC has a population 3.7 million and a gross domestic product of roughly US$5 billion.

But the countrys tumultuous recent history and lack of a thriving mining industry isnt worrying Century.

“We believe that the Republic of the Congo has all of the ingredients necessary to sustain a profitable aluminum industry,” Logan W. Kruger, Centurys president and chief executive officer said in a prepared statement.

The news failed to bolster Centurys share price on a day when aluminum prices were off 2 to US$1.25 a lb. The companys shares were off 75 to US$44.43 on nearly 700,000 shares traded.

On Feb. 6, Bloomberg reported that Melbourne-based mining giant BHP Billiton (BHP-N, BLT-L) was considering digging a bauxite mine and building an aluminum smelter in the DRC. The potential for cheap hydropower coming from the Congo River was cited as a leading driver for the possible investment.