Alcoa sees opportunity in Vietnam

Vancouver – Alcoa (AA-N) is moving quickly to take advantage of a new possibility in Vietnam.

The government of Vietnam recently granted permission for Vietnam’s leading mineral development company, the Vietnam National Coal-Mineral Industries Group of Vinacomin, to establish joint ventures. Foreign partners are allowed to hold up to 40% of a jointly-held company.

Aware of Vietnam’s bauxite deposits, Alcoa realize the possibilities in the new joint venture possibility and quickly signed a cooperation agreement with Vinacomin for cooperation in development of the aluminium industry in Vietnam.

Under the agreement, Alcoa World Aluminium and Chemicals (AWAC), which is a joint venture between Alcoa and Alumina with Alcoa holding 60%, will conduct due diligence on the development-ready Nhan Co alumina refinery. If all goes well, AWAC would take on a 40% interest in the 600,000 tonne-per-year refinery to be built in Dak Nong province, in the Central Highlands. The final distribution of ownership would be Vinacomin 51%, AWAC 40%, and other investors 9%.

The Nhan Co alumina refinery will source bauxite from the Dao Nghia mine. Development plans call for a two-stage approach. In stage one, the mine will produce 1.7 million tonnes of bauxite annually to feed a refinery producing 300,000 tonnes of alumina per year. In stage two, annual mine production ramps up to 3.4 to 5.7 million tonnes of bauxite; alumina production increases to 600,000 to 1 million tonnes per year. The first stage is expected to cost US$250 million; the second stage adds between US$500 and US$800 million in cost.

In addition, AWAC and Vinacomin have agreed to work together on a joint feasibility study for the Gia Nghia bauxite mine and alumina refinery project, also located in Dak Nong province. Preliminary studies suggest first stage capacity at the refinery, fed by 8.5 million tonnes of primary bauxite from the mine, would be 1 to 1.5 million tonnes of alumina per year. The stage two production numbers are whopping: the mine would produce 17 million tonnes of bauxite a year and the refinery would convert that into some 3 million tonnes of alumina annually. Each stage at Gia Nghia is expected to cost roughly US$1.2 billion.

In announcing the agreement, both Alcoa and Vinacomin paid tribute to the governments of Vietnam and the United States for their efforts to create an environment of “friendly cooperation” between the two countries. The two companies began discussions in 2006.