Noranda silent on offers for St Ann bauxiteTuesday, April 19, 2016
BY AVIA COLLINDER Business reporter firstname.lastname@example.org
The Jamaica Observer understands that the latest offer made for Noranda Bauxite Ltd (NBL) in St Ann is US$100 million from an investor in the United States.
The bauxite mine provides all of the bauxite ore used for the production of alumina at Noranda Aluminium Holdings Company’s (NAHC) Gramercy alumina refinery in Louisiana in the United States.
Additionally, about 40 per cent of the bauxite ore produced by St Ann is supplied to a third party refinery. Current annual production at St Ann is 4.5 million tons of ore, as indicated by NAHC on its website.
With NAHC intent on selling its downstream foil business, it has apparently grabbed the interest of asset hunters who are looking at other aspects of its business including the bauxite mining operation which is owned jointly with the government of Jamaica.
NAHC, however, refused to comment on the latest offer or any other when contacted by the Business Observer.
The investor, whose name has been withheld, is also said to have approached the new Minister of Transport and Mining Mike Henry for discussions in mid-April.
The Government of Jamaica owns 51 per cent of the assets of Noranda Jamaica Bauxite Partners, which is managed and operated by Noranda Bauxite Ltd, subsidiary of NAHC.
The Business Observer was unable to elicit a comment from Minister Henry with questions passed on to permanent secretary Dr Alwin Hales who had not responded up to press time.
The previous offer for NBL was said to be made by the Chinese who are now openly seeking bauxite assets.
The BauxiteIndex.com reports increased demand for imported bauxite in China while Bloomberg also indicates that investors connected to Chinese smelters are seeking outside sources of the ore. Bloomberg says the main target is Australia where Rio Tinto Group, the world’s second-biggest miner, is advancing talks with potential customers in China for its new US$1.9 billion bauxite project .
Malaysia, meanwhile, which furnished China with about 40 per cent of supplies, decided in January to suspend mining for three months to cut river and sea pollution.
It is understood that representatives of Jiuquan Iron and Steel (Group) Company (JISCO) who have reached agreement with UC Rusal for the sale of Alpart in Nain, St Elizabeth, are now in the island for talks with Rusal reps and also the new government.
Noranda is not openly entertaining any offer for the mining operation, with an apparent focus on an ongoing restructuring exercise.
On February 8, 2016, NAHC and its indirect subsidiaries voluntarily filed to initiate a court-supervised restructuring process under Chapter 11 of the Bankruptcy Code.
The company, which had previously given notice of financial difficulties and a plan to cut staff, says on its website, "We took this action to have additional time and flexibility to evaluate options for our various business operations," adding, "our objective is to stabilise our upstream operations as we explore ways to make them economically viable."
Under court supervision, it is currently seeking a buyer for its Flat-Rolled Products business which it describes as profitable, and cash flow-positive .
NACH had cited US$5 million owed to the government of Jamaica for the bauxite levy as a part of its troubles.
In 2015, the GOJ said NBL should pay US $5.67 for every dry tonne of bauxite Noranda ships, but Noranda stated that the applicable rate was US$2.50 a tonne, a concession which the Government implemented in 2010 during the recession. The GOJ said the concession had expired.
Subsequently arbitrators determined that the money owing should be paid.
In March, Noranda started talks with the new government in Jamaica. The results of the discussion have not been made public, but comments by the Minister of Finance hinted at a reversal.
In late March, Minister of Finance Audley Shaw told Parliament, in a comment on ongoing talks with Noranda, "The issue is that the company has directed an appeal to us and in the spirit of natural justice, we have to hear the appeal."