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CANADIAN MINING PERSPECTIVES – Aluminum developments, large and small

Aluminum producers both large (such as BHP Billiton) and huge (such as Alcan) are making investments in potential n...



Aluminum producers both large (such as BHP Billiton) and huge (such as Alcan) are making investments in potential new capacity in an attempt to take advantage of continuing high metal prices. On the morning of May 2, the price of aluminum was US$1.28/lb, roughly double what it was four years ago.

The big development in the aluminum industry last week was the announcement that ALCAN of Montreal and MAADEN of Saudi Arabia signed a US$7-billion joint venture covering everything mine-to-metal. The project includes a 1,400-MW power generation plant, a 1.6-million-t alumina refinery and a 720,000-t/y aluminum smelter (which may be expanded to 2.1 million t/y). The project will be based on 90 million t of bauxite reserves located in Az Zairah in the northern part of the kingdom. Production is planned for 2011.

If the deal is completed as contemplated, Alcan (www.Alcan.com) will hold a 49% stake the venture and will provide technology and operating management support.

The impact of this news was eclipsed by New York-based ALCOA INC.’s May 7 announcement of its intention to take over Alcan. The hostile offer is worth US$73.25 per Alcan share (a combination of US$58.60 cash plus 0.4108 of an Alcoa common share), for a business enterprise value of about US$33 billion. Alcan posted revenues of US$23.6 billion in 2006.

On the Atlantic Coast of the African Continent, BHP BILLITON of Australia is committing a mere US$140 million to acquire a 33.3% interest in GLOBAL ALUMINAs Sangaredi refinery project in Guinea. Some of the available numbers make this look like a steal: 233 million t of bauxite reserves and a 3-million-t/y alumina refinery (already in the feasibility stage). Total cost of the project is US$3 billion with production to begin in 2010.

BHP Billitons (www.BHPBilliton.com) partners in Sangaredi are Global Aluminum (33.3%), Dubai Aluminium (25.0%) and Mudadala Company (8.3%).


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