Aluminum giants eye Guinean refinery (May 24, 2004)

The world’s two largest aluminum producers — Alcoa (AA-N) and Alcan (AL-T), of Pittsburgh, Pa., and Montreal, Que., respectively — are considering joining forces to build an alumina refinery in Guinea, West Africa.

The companies are proposing a refinery with an annual capacity of 1.5 million tonnes and potential for expansion. If approved, the plant could begin producing by early 2008.

Each company would market its alumina off-take independently, and Alcoa would operate the refinery. The cost of the project has yet to be determined.

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

CBG’s has exclusive rights to bauxite reserves and resources in a 25,900-sq.-km area in the northwestern part of the country. (Bauxite is a source of alumina, or aluminum oxide, which is extracted and smelted into aluminum.)

The news follows the passing of legislation in Queensland, Australia, that revokes Alcan’s rights to the Aurukun bauxite reserves in that state. The move effectively ends Alcan’s ongoing fight to protect its rights in the state’s Supreme Court.

“We are troubled that our rights to the Aurukun leases have been legislated away,” says Michael Hanley, president of Alcan’s Bauxite and Alumina group. “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.”

Alcan inherited rights to Aurukun via its takeover of Pechiney, which was granted 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.

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

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 800 km south of Moscow, and includes a cast house plus specialized plate rolling and finishing equipment.