Billiton, Mitsubishi of Japan and the Industrial Development Corp. of South Africa (IDC) have decided to go ahead with a US$860-million expansion program at the Mozal aluminium smelter in Mozambique.
The post-merger BHP-Billiton‘s share will be US$405 million.
The expansion will increase the smelter’s annual aluminium capacity by 253,000 tonnes. It was approved by the government of Mozambique in February.
Construction will begin immediately, with commissioning slated for late 2003. The smelter is expected to hit full stride six months thereafter.
After the expansion, the twin potline will churn out 506,000 tonnes aluminum per year. The partners have already negotiated a competitive electricity contract price, which runs through 2025, with the Mozambican Transmission Company.
Ownership of the smelter will be spilt between Billiton (47.11%), Mitsubishi (25%) and IDC (24.04%). Billiton sold 37.89% of its preferential expansion rights to an 85% interest to the other partners. The government of Mozambique will hold 3.85% in the form of preference shares.
The expansion program will be funded 40% by equity and 60% by debt. Senior debt will be mainly in the form of export credit from South Africa (US$250 million) and France (US$150 million). Another US$125 million will be provided by the Mozal 1 international funding agencies, with two new lenders, JBIC from Japan (US$75 million) and EDC from Canada (US$25 million). The peak funding requirement, including interest during construction, is projected to be US$1 billion.
The US$1.34-billion Mozal I smelter opened in 1998. It was designed with the Mozal II expansion in mind. The site has space for the installation of a second potline, anode baking and casthouse facilities.
The only significant additional infrastructure required off-site will be a second ship unloader and storage facilities at the Mozal harbour. Also required is an extra 132 kV transmission line from Motraco’s substation, which is located near the smelter site.
During peak construction activity, the project will employ up to 5,000 people. Once the expansion is complete, the smelter will add 270 workers, bringing the total workforce to 1,000.
BHP and Billiton expect to finalise their merger next week.
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