Big players jostle for bauxite reserves
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.