Chalco Pressing On With Australian Alumina Plant Study
June 19 2009 - 3:29AM
Dow Jones News
Aluminum Corp. of China Ltd. (601600.SH), or Chalco, and
Australia's Queensland state government said Friday the Chinese
group is committed to completing a feasibility study for a planned
alumina refinery at Bowen this year.
However, analysts said the depressed market conditions for
alumina mean it will be years before the plant is actually built,
if ever.
Chalco had previously approached the government with a proposal
to abandon the construction of the plant, and to instead process
material from its planned Aurukun bauxite mine at Rio Tinto Ltd.'s
(RTP) Yarwun refinery.
Chalco's parent, Aluminum Corp. of China, or Chinalco, had been
set to take up to a 50% stake in Yarwun as part of its planned
US$19.5 billion alliance with Rio, and also had the option to fund
a share of an expansion of the refinery currently underway.
Rio's decision to walk away from that deal means Chalco no
longer has access to Yarwun.
A spokesman for Queensland's Department of Infrastructure and
Planning said the government now expects Chalco to proceed with its
plans for a study of the Bowen smelter.
"Chalco has confirmed that its priority is to complete the
feasibility study for both the mine and refinery at Bowen later
this year," he said.
"The company will then be able to inform the Queensland
Government of their conclusions."
A Chinalco spokesman also said Chalco was pressing on with its
feasibility study, but declined to comment on its previous proposal
to the government for the Bowen refinery to be abandoned.
"Chalco is committed to honoring its undertaking to the
Queensland Government to complete the feasibility study into the
establishment of a bauxite project at Aurukun," she said.
"The feasibility study is thorough and on schedule, and no
investment decision will be made until it has been completed."
One analyst who did not want to be named, said that while the
focus for Chalco was now back on a refinery at Bowen, market
conditions meant construction is unlikely to begin any time
soon.
Established alumina producers are shutting in capacity and Rio
Tinto said earlier this year that about 70% of the global alumina
industry was operating at a loss, so Chalco will not be hurrying to
spend money on an expensive greenfield refinery.
Despite the acrimony over the failure of Rio's alliance with
Chinalco, both parties have said they remain open to cooperation in
the future, and one analyst said they could yet come to an
agreement in Queensland in the future when tensions had eased and
market conditions had improved.
Once Rio exhausts its Weipa bauxite mine in Queensland it plans
to move south to the Embley deposit, which borders Chalco's planned
Aurukun mine and the pair were discussing potential benefits of
cooperating there well before the US$19.5 billion alliance deal was
proposed.
"Rio and Chinalco have been talking together for so long that
they both have a good idea what they want to get out of any
commercial relationship," the analyst said.
"I'd be surprised if Chinalco did anything that was contrary to
their interest...I'm sure there is something there they can work
out jointly."
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com