EGA to build bauxite mine in Guinea

Emirates Global Aluminium to build $1 billion bauxite mine in Guinea to secure long term supply of the raw material.
William Morrell, chief executive of Guinea Alumina Corporation, in Abu Dhabi on June 22, 2016. Christopher Pike / The National
William Morrell, chief executive of Guinea Alumina Corporation, in Abu Dhabi on June 22, 2016. Christopher Pike / The National

Emirates Global Aluminium [EGA], one of the world’s largest producers of aluminium, is moving ahead with the construction of a US$1 billion bauxite mine in the Republic of Guinea.

The investment will secure access to the mineral used in making aluminium and boost the company’s production of the metal in the long run.

The mine, first announced in 2013, will be built by EGA subsidiary Guinea Alumina Corporation [GAC]. It is expected to start production in 2018. With an output of 12 million tonnes of bauxite a year, the mine will be one of the key producers of the highest-grade bauxite in the world, said William Morrell, the GAC chief executive.

“This will put us in a position where we will be in charge of our destiny from mine rights right through to metals, giving us robustness, even in a downward market,” Mr Morrell said. “It puts us in a much stronger position to compete on a level footing with them.”

It will also secure low costs for the parent company EGA as commodity producers the world over feel the strain from lower prices. Bauxite is the rock processed into alumina, which in turn is processed into aluminium. Guinea has the world’s largest reserves of bauxite. The mine will create about 4,000 jobs in Guinea, as well as employment in Abu Dhabi. The bauxite produced will supply EGA and will also be sold on the world markets, Mr Morrell said.

Despite the hard times for commodity producers, Abdulla Kalban, the EGA chief executive, said he was bullish about the long-term demand for aluminium, with its increasing use in the manufacture of cars, aircraft and construction fuelling demand. Already, there are signs that demand is increasing. The price of aluminium traded in London has gained about 8.5 per cent so far this year after dropping 19 per cent last year.

“This investment builds on our plan to secure EGA’s supply chain and capitalise on growth in the third-party bauxite market,” Mr Kalban said.

“Despite the prevailing challenges facing the aluminium industry, we remain confident in the long-term outlook for the sector, and believe it is the right time for us to invest in high-quality, cost-competitive assets.”

GAC signed a 25-year mineral concession deal with Guinea in 2013, with the possibility of renewing it for another 25 years. The concession has bauxite reserves totalling about 1 billion tons. Mr Morrell said negotiations for financing the $1bn are well under way.

“It will be significantly project-financed, so we are working with multilaterals,” he said, declining to name the financiers.

“We started negotiations in earnest eight months ago. We are also looking at other sources of funding apart from project finance, which include export credit agencies and commercial banks all over the world.

The UAE, the world’s fourth-largest producer of aluminium, is counting on EGA to help push its efforts at making the country’s economy less dependent on oil amid the biggest slide in energy prices since the global financial crash of 2008.

EGA, which was created by the merger of Dubai Aluminium and Emirates Aluminium in 2013, posted an almost 50 per cent drop in net profit last year as the price of aluminium plunged amid a supply glut.

Along with its project in Guinea, EGA is in the process of building a $3bn alumina refinery in the UAE as a boom in regional infrastructure projects spurs demand. The refinery is expected to be operational by next year and will be completed in two phases, each with an annual production capacity of 2 million tonnes.

EGA, which is owned equally by the Abu Dhabi investment firm Mubadala Development Company and the sovereign wealth fund Investment Corporation of Dubai, has a production capacity of 2.4 million tonnes per year.

Published: June 22, 2016 04:00 AM


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