Jamalco to get US$15 million in 2024
UNITED STATES (US)based Century Aluminum plans to invest up to US$15 million (J$2.3 billion) in the alumina operations at Jamalco in Clarendon this year, which doubles its investment a year earlier.
The investments include new equipment, but also funds to maintain operations.
“The US$10 to US$15 million reflects the restoration projects and the powerhouse,” said Jesse Gary, president and CEO of Century in an investor call on Wednesday following the release of the manufacturer’s earnings report. “So, there is a mix of investments in sustaining capital expenditure as well.”
The company invested US$7 million in capital expenditure in Jamalco in 2023, and will continue investing in building Jamalco’s asset base until 2026, according to management’s statement last year.
During the year, however, Jamalco suffered a series of unexpected “equipment failures” that cost the company US$30.4 million in total over the final six months of 2023. This prevented the plant from improving its output from 80 per cent to the full 1.4 million tonnes of capacity.
Returning Jamalco to its full potential, however, remains a priority for 2024, management explained.
“We expect Jamalco to break even on an EBITDA basis in quarter one, and as we see the production efficiency improvements take hold, we expect that EBITDA generation will improve in the second quarter and beyond,” stated Gary about EBITDA, which equates to earnings before interest, taxation, depreciation and amortisation.
Last May, Century acquired 55 per cent of Jamalco, replacing Noble Group of Hong Kong as joint-venture partner with the Government of Jamaica, which holds the remaining 45 per cent through holding company Clarendon Alumina Partners. The acquisition of Jamalco gave Century access to quality alumina and bauxite for its smelters in then US and Iceland.
“We had headwinds, delays in restoration of our high-efficiency boilers and energy disruptions,” stated Gary about Jamalco. “We are quite confident that over time we can return the asset to producing in the second quartile of the global cost curve.”
The island falls within the third quartile but can enter the second quartile by increasing its production while maintaining costs.
Century recorded a net loss of US$43 million on net sales of US$2.2 billion for its 2023 financial year. This was worse than its performance in 2022 when it recorded a net loss of US$14 million from net sales of US$2.8 billion. Its core earnings at US$120 million EBITDA in 2023 declined compared to US$144 million EBITDA in 2022.
In its third-quarter ending September, Century booked a US$103.3-million gain on its acquisition of Jamalco, which translates to $16 billion in Jamaican currency.
Century described the deal struck in May as a “bargain purchase gain”, having paid US$1 for the lossmaking asset.
Nine years ago, Noble acquired its stake in Jamalco from Alcoa World Alumina and Chemicals for US$140 million, but has suffered losses and incurred debt since taking management control of the operation.
It made the decision to sell after a fire that led to a lockdown of the plant for a period.