Aluminum giants eye Guinean refinery (May 13, 2004)

The world’s two largest aluminum producers are looking at the feasibility of joining forces to build an alumina refinery in the Republic of Guinea, West Africa.

Pittsburgh-based Alcoa (AA-N), the world’s biggest producer, and no. 2 producer Montreal-based Alcan (AL-T) will immediately begin an update of a previous study by Alcoa. The new study will consider an expandable 1.5-million-tonne-per-year refinery that could begin producing by early 2008. The pair expect to wrap up their study by mid-2005.

The plan calls for each company to market their respective alumina off-take independently; Alcoa would operate the facility. The cost of the project was not mentioned.

Alcoa and Alcan already share an 86% stake in Halco Mining, which in turn owns a 51% interest in Compagnie des Bauxites de Guinee (CBG) that currently mines bauxite for export in the Boke region of the country. The government of the Republic of Guinea holds the balance of CBG.

CBG’s exclusive rights to bauxite reserves and resources in a 10,000-sq.-mile area in the northwestern part of the country run through 2038. Bauxite is a source of alumina (aluminum oxide), which is extracted and smelted into aluminum.

Alcoa and Alcan plan to talk with CBG and the government regarding their participation in the project, the company has also had informal discussions with the International Finance Corporation concerning a possible investment.

Downer, down under

The latest announcement comes a day after Alcan said that the government in Queensland has passed legislation revoking its rights to the Aurukun bauxite reserves in northern portion of the Australian state.

The move effectively kills Alcan’s ongoing fight to protect it rights in the state’s Supreme Court.

“Understandably, we are troubled that our rights to the Aurukun leases have been legislated away. The fact that the government reverted to legislation as a means to enforce its position is a clear recognition of the validity of our rights and the defence that we were prepared to mount before the courts,” said Michael Hanley, president of Alcan’s Bauxite and Alumina group.

Alcan also recently said that it had offered to fast-track a A$15-million feasibility study of a bauxite mine and alumina refinery at Aurukun.

Alcan inherited rights to Aurukun via its takeover of Pechiney, which was granted the rights to the bauxite deposits in 1975. The government claims Pechiney failed to meet a commitment to build a processing plant on-site by 1988. Legal action began in October 2003, with the government alleging Pechiney’s rights had expired and that the company had failed to surrender the project.

With Alcan’s rights revoked, the government plans to put Aurukun up for tender; Alcan has yet to decide if it will participate.

Bauxite is the natural mineral used to produce powdered alumina, which is then turned into aluminum.

Earlier this month, Alcoa agreed to buy controlling interests the Samara and Belaya Kalitva aluminum fabricating facilities from Russia’s top aluminum producer Rusal. The purchase price was not disclosed; the deal is expected to wrap up by the end of June, subject to government approval.

The deal also includes long-term arrangements for the supply of metal to the two plants. The Samara plant will continue to supply can stock and other products to Rusal’s affiliates. Separately, the parties are also entering into a long-term alumina supply arrangement.

Samara, about 800 km southeast of Moscow, includes a cast house, forging and extrusion presses, and sheet rolling and coating capabilities. Belaya Kalitva is situated 800 km south of Moscow, and also includes a cast house plus specialized plate rolling and finishing equipment and forgings capabilities.