Big play­ers jos­tle for baux­ite re­serves

The Weekend Australian - Travel - - Resources - Robin Bromby

SUD­DENLY Guinea, Ja­maica and Suri­nam find them­selves in the spot­light — all be­cause of their huge re­serves of baux­ite, the feed­stock for the alu­minium in­dus­try. BHP Bil­li­ton took a foothold in Guinea in late April, and the Ira­ni­ans are knock­ing on doors in Conakry try­ing to get a slice of the ac­tion while there is still a slice to be had.

Suri­nam is ready to start talk­ing to Al­can and BHP on a baux­ite min­ing agree­ment (the project would also in­volve an alu­mina re­fin­ery and alu­minium smelter, all pow­ered by a new hy­dro-elec­tric power sta­tion), while Ja­maica’s econ­omy has had a sig­nif­i­cant boost from baux­ite pro­duc­tion reach­ing its high­est level in 30 years. And the de­ci­sion by Rio Tinto to out­bid Al­coa for Al­can is an­other sig­nal that the play­ers in the alu­minium busi­ness are aiming to put their feet on the baux­ite raw ma­te­rial as much as the smelt­ing and re­fin­ing.

The rea­son is a familiar one: soar­ing world de­mand as de­vel­op­ing coun­tries mod­ernise, par­tic­u­larly China. Alu­minium con­sump­tion in China has grown by 110 per cent since 2000 and it is now the world’s lead­ing con­sumer.

It takes be­tween four and five tonnes of baux­ite to pro­duce two tonnes of the white pow­dery sub­stance called alu­mina, which is then smelted into one tonne of the light­weight metal known as alu­minium.

Al­can, when re­port­ing its first quar­ter profit in late April, pre­dicted that global alu­minium con­sump­tion would jump by 9 per cent in 2007 al­though the com­pany added that pro­duc­tion would at least meet this ex­tra de­mand, lead­ing to a mod­est sur­plus. That should not have too im­me­di­ate an ef­fect on prices as in­ven­to­ries are at his­tor­i­cally low lev­els, rep­re­sent­ing about six weeks’ global con­sump­tion.

A few days af­ter that bullish fore­cast was made, the Mon­treal-based alu­minium gi­ant an­nounced it had signed a $US7 bil­lion project in Saudi Ara­bia. Al­can — which­ever com­pany ends up own­ing it — will hold 49 per cent of a ‘‘ mine-to-metal’’ op­er­a­tion that will in­clude a baux­ite mine, alu­mina re­fin­ery, and an alu­minium smelter and power plant. The ma­jor­ity stake will be re­tained by the gov­ern­ment-owned Saudi Ara­bian Min­ing Co with first pro­duc­tion ex­pected in 2011.

An­other sign that the search for baux­ite is in high gear was the deal struck by BHP Bil­li­ton by which it will spend $US140 mil­lion to buy a third share of Global Alu­mina’s project in Guinea. A fea­si­bil­ity study on the $US3 bil­lion San­garedi project is due to be fin­ished in early 2008. As it stands now, the de­posit of 233 mil­lion tonnes is pro­jected to sup­port a baux­ite mine pro­duc­ing 9 mil­lion tonnes a year, with an as­so­ci­ated alu­mina re­fin­ery pro­duc­ing 3 mil­lion tonnes. The own­ers ex­pect fur­ther ex­plo­ration could in­crease this.

The Gulf states are find­ing get­ting enough baux­ite and alu­mina for their alu­minium plants is the main chal­lenge. Two smelters al­ready op­er­ate — owned by Alu­minium Bahrain and Dubai Alu­minium — with four more planned or un­der con­struc­tion. Th­ese in­clude So­har Alu­minium in Oman (in which Al­can holds a 20 per cent stake), Qatalum in Qatar and the Emal smelter in Abu Dhabi.

Dubai Alu­minium is to build an alu­mina re­fin­ery in Guinea, and is also plan­ning a baux­ite mine and alu­mina re­fin­ery in the In­dian state of Orissa as part of its search for se­cu­rity of sup­ply. The Ira­ni­ans, mean­while, just want the baux­ite; their stated plan is to pro­duce the min­eral in Guinea’s Boke re­gion and slurry it by pipe­line to the wharves at Conakry, then ship it home for pro­cess­ing.

There seems lit­tle ques­tion about the de­mand for baux­ite and alu­minium, es­pe­cially from China (which, un­til now, has been im­port­ing much of its baux­ite from In­done­sia). The coun­try im­ported about one mil­lion tonnes in 2001 but latest pro­jec­tions are that this yearly re­quire­ment from over­seas pro­duc­ers will hit 10 mil­lion tonnes this year. How­ever, that fore­cast may prove to be on the low side. Cana­dian an­a­lysts be­lieve Chi­nese im­ports have al­ready reached the level of two mil­lion tonnes a month.

Bei­jing has dis­cour­aged too much de­vel­op­ment of alu­mina and alu­minium pro­duc­tion at home, mainly due to con­cerns about the strain th­ese op­er­a­tions place on the coun­try’s elec­tric­ity and wa­ter re­sources. Late last year, for ex­am­ple, the cen­tral gov­ern­ment or­dered a halt to the 1.2 mil­lion tonnes a year plant by Shan­dong Xinfa Huayu Alu­mina. Chi­nese pol­icy seems to be that re­finer­ies should be close to the mines that sup­ply them — and if that is over­seas, then that is where en­er­gy­con­sum­ing pro­cess­ing should take place.

But it’s also a mat­ter of go­ing where the baux­ite is — and Guinea, Aus­tralia and Ja­maica are the prime des­ti­na­tions.

Ac­cord­ing to the KPMG, Aus­tralia is es­ti­mated to be re­spon­si­ble for about 34 per cent of world baux­ite pro­duc­tion from its five mines — Bod­ding­ton, Huntly and Wil­low­dale in West­ern Aus­tralia, Gove in the North­ern Ter­ri­tory and Weipa in Queens­land.

Co­ma­lco has com­mit­ted $550 mil­lion to lift pro­duc­tion at Weipa to 25 mil­lion tonnes a year, with most of that ad­di­tional baux­ite ear­marked for its Gladstone alu­mina re­fin­ery.

The largest fu­ture de­vel­op­ment on the cards is the $3 bil­lion Au­rukun de­posit at Cape York, with the Queens­land Gov­ern­ment hav­ing awarded pre­ferred de­vel­oper sta­tus to Alu­min- ium Corp of China. Chalco, as the Chi­nese com­pany is usu­ally known, is the world’s sec­ond largest alu­minium pro­ducer. It will take the Chi­nese two years to com­plete a fea­si­bil­ity study — it­self cost­ing $40 mil­lion — on min­ing the baux­ite and build­ing a $2.1 bil­lion re­fin­ery in Queens­land, with the prime can­di­date sites be­ing Gladstone, Bowen and Townsville.

The Au­rukun mine would pro­duce about 6.4 mil­lion tonnes of baux­ite a year.

KPMG said the main un­de­vel­oped baux­ite de­posits re­main­ing in Aus­tralia were at Weipa and Gove along with the Dar­ling Ranges, Mitchell Plateau and Cape Bougainville in West­ern Aus­tralia.

In Jan­uary, Chalco an­nounced it would spend $US547 mil­lion on a new alu­mina project at Chongqing which would in­clude new mines and elec­tric­ity gen­er­a­tion plants — all part of Chalco’s plan to in­crease alu­mina pro­duc­tion from 8.3 mil­lion tonnes in 2005 to 14 mil­lion tonnes a year by 2010. An­other part of that plan is Viet­nam, where Chalco is ne­go­ti­at­ing with state-run Viet­nam Coal and Min­ing In­dus­tries Group.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.