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Finance minister moves to allay fears as bauxite giant posts hefty loss

BY BALFORD HENRY Senior Staff Reporter balfordh@jamaicaobserver.com

Monday, March 31, 2014    

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NEWS that Russian aluminium producer UC Rusal has posted a US$3.2-billion loss for 2013 has raised fresh concerns about the future of Jamaica's bauxite industry and questions as to whether the company will resume full production here.

Recent reports suggested that UC Rusal is struggling to repay debts and is working with its creditors to restructure more than US$10 billion in debt.

UC Rusal owns three local bauxite alumina plants, of which only one, Ewarton, is operational. However, the Russian company has insisted that it will reopen the others by 2016, using less expensive energy. UC Rusal's plants at Alpart and Kirkvine, have been closed since 2009.

On Tuesday, Minister of Finance and Planning Dr Peter Phillips moved to allay fears, assuring the House of Representatives that Jamaica is meeting its international obligations to the sector, and that UC Rusal's plans for expanding its operations in Jamaica by 2016 are still on target.

"Rusal has indicated that they are in Jamaica to stay. I would say that bauxite and alumina has a healthy future in Jamaica, which will firm up as the world economy moves into a period of growth," said Phillips.

Phillips was keen to point out that bauxite and alumina had actually shown growth in the last two quarters.

"We have been able to meet all our obligations with Alcoa, hence the Jamalco plant is operating at capacity. It is also the case that Ewarton is operating, and it is an energy solution which is an integral part of the operation and the expansion of the operations," he added.

A full update on the future of UC Rusal's Alpart and Kirkvine operations is to be given by Minister of Science, Technology, Energy and Mining Phillip Paulwell to the House of Representatives in the upcoming budget debates, said Phillips.

Phillips was responding to questions raised by Audley Shaw, the Opposition spokesman on finance and planning, as to whether the Government had been meeting its bauxite/alumina obligations on a timely basis, and whether the proposed UC Rusal expansion was on target.

Shaw said that the reopening of the two shuttered plants was critical for economic growth.

"If we are not talking about the reopening of these plants, then we are really not looking at any significant growth in the economy. This industry is an integral part of the growth trajectory of our very fragile economy," Shaw said.

Shaw said that, in the meantime, he has learnt that Kirkvine is being "virtually scrapped" on a weekly basis and major equipment and other material moved to Ewarton, to support the operations there and, in other cases, shipped to Guyana to support UC Rusal's operations in that region.

Shaw said that he had also taken note of the fact that Paulwell has "publicly threatened" UC Rusal with revocation of its mining licences.

"We don't know what will be the future of Alpart but certainly what we do know is that one plant is being scrapped and the minister is threatening the operators of the other with the revocation of their mining licences," Shaw said.

UC Rusal owns 100 per cent of the shares in Alpart, in St Elizabeth, and a 93 per cent share in the West Indies Alumina Company's (WINDALCO) plants at Kirkvine, Manchester, and Ewarton, St Catherine, with the Government owning the other seven per cent in both.

Ewarton and Kirkvine were closed in 2009, but Ewarton resumed production in 2010. US producer Alcoa operates Jamaica Alumina Co (Jamalco), Clarendon, in partnership with the state-owned firm Clarendon Alumina Production Limited (CAP), which owns 44 per cent.

The other industry firm operating in Jamaica is Noranda Jamaica Bauxite Partners, formerly St Ann Bauxite Jamaica Limited and prior to that Kaiser Jamaica Bauxite Company, which is a partnership between Noranda Bauxite Limited (NBL), a Jamaican limited liability company, and the Government of Jamaica. The Government of Jamaica owns the remaining 51 per cent of Noranda.

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