THE move by St Ann Bauxite to reduce its employee headcount by 160 persons and outsource its mining operations to a third party is expected to save the company US$4 million ($356 million) to US$5 million ($445 million) annually.

What’s more the company has cut capital expenditure by US$7 million to US$8 million.

Noranda Aluminum — which owns 49 per cent of St Ann Bauxite Bauxite — in a filing to the US Securities and Exchange Commission (SEC) said that the “the substantial portion of our bauxite mining to third party contractors” was contracted out on April 21, 2010.

The termination “through a combination of voluntary retirement packages and involuntary terminations”, according to Noranda, will result in pre-tax charges of US$3 million to US$4 million in the second quarter of 2010.

During 2009, Noranda “received a claim from the UAWU in Jamaica which alleges that (it) failed to properly negotiate with the union in advance of declaring approximately 150 UAWU members redundant”.

Noranda said it was contesting the claim “vigorously”.

St Ann Bauxite has a special mining lease with the Government for the supply of bauxite.

The lease ensures access to sufficient reserves to allow St Ann to ship annually 4.5 million dry metric tonnes of bauxite from mining operations in a specified concession area through September 30, 2030. In return for these rights, St Ann is required to pay fees called for in the establishment agreement totalling in excess of US$2 million.

St Ann provides a secure source of bauxite to our wholly owned alumina refinery in Gramercy, Louisiana. Its alumina refinery provides a strategic supply of alumina to its New Madrid smelter at costs below recent spot market prices for alumina.

Currently, Noranda has a contract with St Ann to purchase approximately 2.4 million tonnes of Jamaican bauxite per year at a mutually agreed upon purchase price per dry metric tonne. That contract runs to December 31, 2010. St Ann also sell these raw materials to third parties.

For instance, last month Noranda reached an agreement in principle with Glencore to extend Sherwin’s contract to purchase bauxite from St Ann through 2012.