Alcan plans US$7 billion Saudi aluminium project
Wednesday, May 2, 2007
ALCAN INC said on Monday it will develop a US$7 billion project to build, with Saudi Arabian mining company Ma'aden, what would be one of the largest integrated aluminium-making operations in the world.
Alcan, the world's No 2 maker of primary aluminium, would hold a 49 per cent stake in the project, which would comprise 1,400 megawatts of power generation, a 720,000-tonne aluminium smelter and 1.6-million-tonne alumina refinery.
It would draw on a 90-million-tonne bauxite reserve in Az Zabirah in northern Saudi Arabia, which represents 30 years of mining, Alcan said.
Ma'aden will own the other 51 per cent of the project and Alcan will provide technology and operational support.
Ma'aden is a joint stock company formed in March 1997 and wholly owned by the Saudi government.
The firm, which is mainly a gold miner, has plans to raise up to US$2.5 billion this year in an offering of shares that could put 40 per cent of the company into public hands.
The next step in the project is completion of the joint venture agreement and preparation of financing, Alcan said.
Montreal-based Alcan said it expects the project's first metal to be poured in the first quarter of 2011, with the first alumina produced a year later. Alumina is refined from bauxite and is the key input, along with massive amounts of electric power, in making aluminium. Saudi Arabia has been making efforts to attract investment from big aluminium makers, relying largely on gas-fired electric power.
"They've got cheap energy, and that's where aluminium smelters get built," said Victor Lazarovici, an analyst at BMO.
The Saudi project would add to the global supply of primary aluminium, which depending on world demand, could have an affect on prices for the metal.
"To be involved in the project is a net positive for Alcan, in that they at least get to participate in the upside generated by the project as well any potential downside for the market," Lazarovici said.
The smelter will initially be based on two potlines using AP36 technology, but will be designed to accommodate four more potlines that could increase annual capacity to more than two million tonnes, Alcan said.
Chief Executive Dick Evans said the project has "an ideal combination of competitive energy resources, local bauxite, well-developed infrastructure and favourable logistics".
"Consistent with Alcan's primary metal strategy, this project has the potential to achieve one of the lowest operating costs in the industry and become one of the world's largest smelters," he added in a statement. Alcan, which has said it wants to tap what it sees as surging demand in the developing world for aluminium, said the alumina plant, aluminium smelter and power generation facilities would be located in the new Minerals Industrial City at Ras Az Zawr, on the east coast of Saudi Arabia. At Alcan's annual meeting on Thursday, Evans had hinted that the company was mulling a number of undisclosed projects.
Two of its major projects are stalled the US$1.8 billion expansion of its Kitimat smelter in Western Canada, and a plan to add capacity to its ISAL smelter in Iceland.
Lazarovici said aluminium makers such as Alcan have to plan for the long term so that production matches growing demand.
"Clearly, they are not going to stand still and pass up opportunities if there are delays at Kitimat and ISAL," he said.
Alcan shares slipped 9 Canadian cents to C$66.43 on the Toronto Stock Exchange.
However at midday on Monday, the shares were up 53 cents at US$60.04 on the New York Stock Exchange at midday on Monday.
The shares have risen about 32 per cent over the past six months, largely on higher profits. There has been intermittent speculation that the widely held company may become a takeover target. Reuters
Alcan, the world's No 2 maker of primary aluminium, would hold a 49 per cent stake in the project, which would comprise 1,400 megawatts of power generation, a 720,000-tonne aluminium smelter and 1.6-million-tonne alumina refinery.
It would draw on a 90-million-tonne bauxite reserve in Az Zabirah in northern Saudi Arabia, which represents 30 years of mining, Alcan said.
Ma'aden will own the other 51 per cent of the project and Alcan will provide technology and operational support.
Ma'aden is a joint stock company formed in March 1997 and wholly owned by the Saudi government.
The firm, which is mainly a gold miner, has plans to raise up to US$2.5 billion this year in an offering of shares that could put 40 per cent of the company into public hands.
The next step in the project is completion of the joint venture agreement and preparation of financing, Alcan said.
Montreal-based Alcan said it expects the project's first metal to be poured in the first quarter of 2011, with the first alumina produced a year later. Alumina is refined from bauxite and is the key input, along with massive amounts of electric power, in making aluminium. Saudi Arabia has been making efforts to attract investment from big aluminium makers, relying largely on gas-fired electric power.
"They've got cheap energy, and that's where aluminium smelters get built," said Victor Lazarovici, an analyst at BMO.
The Saudi project would add to the global supply of primary aluminium, which depending on world demand, could have an affect on prices for the metal.
"To be involved in the project is a net positive for Alcan, in that they at least get to participate in the upside generated by the project as well any potential downside for the market," Lazarovici said.
The smelter will initially be based on two potlines using AP36 technology, but will be designed to accommodate four more potlines that could increase annual capacity to more than two million tonnes, Alcan said.
Chief Executive Dick Evans said the project has "an ideal combination of competitive energy resources, local bauxite, well-developed infrastructure and favourable logistics".
"Consistent with Alcan's primary metal strategy, this project has the potential to achieve one of the lowest operating costs in the industry and become one of the world's largest smelters," he added in a statement. Alcan, which has said it wants to tap what it sees as surging demand in the developing world for aluminium, said the alumina plant, aluminium smelter and power generation facilities would be located in the new Minerals Industrial City at Ras Az Zawr, on the east coast of Saudi Arabia. At Alcan's annual meeting on Thursday, Evans had hinted that the company was mulling a number of undisclosed projects.
Two of its major projects are stalled the US$1.8 billion expansion of its Kitimat smelter in Western Canada, and a plan to add capacity to its ISAL smelter in Iceland.
Lazarovici said aluminium makers such as Alcan have to plan for the long term so that production matches growing demand.
"Clearly, they are not going to stand still and pass up opportunities if there are delays at Kitimat and ISAL," he said.
Alcan shares slipped 9 Canadian cents to C$66.43 on the Toronto Stock Exchange.
However at midday on Monday, the shares were up 53 cents at US$60.04 on the New York Stock Exchange at midday on Monday.
The shares have risen about 32 per cent over the past six months, largely on higher profits. There has been intermittent speculation that the widely held company may become a takeover target. Reuters
Business Besides Oil
