Alcoa is likely to press for the winding up of the Aroaima Bauxite Company (ABC) by the end of the year, when the ABC board of directors meets today in an emergency session in Miami.

The Guyana government is represented on the ABC board by Robeson Benn and Neil Kumar. They left Guyana earlier today for Miami.

Alcoa had informed the government when its team visited about ten days ago that it could not contemplate further subsidies to ABC, which it would have to do were ABC to continue in operation. It warned that even if the Government of Guyana (GoG) were of a mind to continue on its own it would have to take over the management of ABC and accept full responsibility for the losses that occur.

Alcoa is prepared to offer its 50 per cent share to the GoG for US$1, which, if accepted, would allow Alcoa to walk away without paying severance to its workers. It warned that were ABC to be declared insolvent, Alcoa would be compelled to seek to recover the US$60 million owed to its wholly owned subsidiary Reynolds International Inc (RII).

The GoG through Prime Minister Sam Hinds has alerted the Guyana Trades Union Congress (GTUC) that "the government's position is that it is not in a position to provide additional subsidies to the bauxite sector."

Alcoa's position was based on BPU Reynolds's announcement that it was not prepared to purchase any metal grade bauxite from ABC next year, if it could not match the US$17.14 a tonne at which it could obtain its supplies from Brazil and Sierra Leone. It was based too on the projection that even if the merger with Bermine's Kwakwani operations and other contemplated actions were to be realised, it would still be unable to match the BPU Reynolds price. ABC previously sold bauxite to BPU-Reynolds at US$27 a tonne and Alcoa projected that the restructured ABC's production cost would be around $24.80 a tonne.

Two of the non-government representatives on the bauxite negotiating team have reportedly recommended that the GoG not attend today's meeting and not cooperate with Alcoa's plans to protect its own financial interest no matter the cost to Guyana. They dismissed Alcoa's threat to pursue recovery of ABC's US$60 million debt, pointing out that ABC was always under Alcoa's management. Instead, they said the GoG should explore legal claims against Alcoa over the management of ABC.

They said that the GoG should set deadlines for completing the negotiations with the Bermine Employees Group and Alcoa on their proposals. They also suggested that the structure of the team should be reviewed in the light of the presence of an ABC director on the negotiating team.

Odinga Lumumba, one of the two government representatives on the negotiating team, held the view that the bauxite industry in Guyana was dead. He told Stabroek News that the bauxite communities at Linden, Everton and Kwakwani should be prepared to accept this inevitability. He said that the country could not continue to be allowed to hold the view that large deposits of ore would ensure viability. Lumumba contended that what was needed now was a non-partisan national discourse including the opposition and the trade unions to look at how to develop a new relationship with the industry.

He said that even if the GoG were to be humane and compassionate and was prepared to provide US$10-15 million a year, there was no guarantee that the industry would achieve the viability and competitiveness required to compete with Brazil and other countries in this era of globalisation and free trade.

Moreover, he said Guyana did not have the technical and managerial skills to move the industry towards modernisation, adding that even with the requisite skills ABC was unable to survive in this new world economic environment.

Lumumba argued that the government had to put in place other forms of employment to help sustain the bauxite communities. He contended that it was always difficult for Guyana to compete, other than in the production of calcined bauxite, because of the amount of overburden that had to be removed before the bauxite ore was exposed.

Lumumba contended that since the oil crisis in the 1970s, the relative demand for aluminium had decreased in relation to the overall use of other metals. He contended that Guyana should have adjusted to this reality but for all sorts of economic and social reasons did not do so.

He posited that if Guyana had been able to develop its hydropower capacity it could have moved into aluminum production and other related products.

Lumumba suggested that a 'long-shot' possibility was some form of consolidation of the operations ABC, Linmine and Bermine in a large corporate structure with no more than 400-500 employees, if it were to be optimally efficient. The challenge then for the government would be the absorption of the thousands of workers who would have to be released to achieve this optimum workforce.

He observed that many people criticised the Prime Minister for saying said that accepting the half of a loaf that Alcoa was offering was better than no loaf at all. But he said that the industry was now close to having to accept a quarter of a loaf or no bread for sure.

Ramon Gaskin, an adviser to the Bermine group said that the Alcoa position was based on the supply of raw material for refining overseas. It was not based on the prospect of value-added products such as chemical and abrasive grades bauxite for which it was unwilling to provide the investment.

Gaskin contended that there was no future for raw materials like gold, timber, sugar, rice and bauxite, arguing that it made no sense to export rice and import rice crispies and export sugar and import sweets!

Gaskin said that the Bermine employees proposal envisaged taking the industry along the value-added route, where prices were more lucrative and there were investors willing to provide the investment to facilitate this sort of production.

The Alcoa concept on the future of ABC submitted to the government earlier this year proposed, in the main, merging ABC's operations at Aroaima with Bermine's operations at Kwakwani to form a new company, closing down Bermine's operations at Everton and reducing the workforce in the industry in Berbice from 940 to 400 over three years; converting ABC's US$60 million debt to Alcoa into equity in the new company and selling off the merged operations at a suitable time to a company it would identify. BPU-Reynolds is the company identified by Alcoa and to which it sold its Corpus Christi, Texas plant to comply with the terms under which it was allowed to take over Reynolds.

The government was inclined to accept the proposal, but because of the firestorm of criticism into which the scheme ran from the opposition political parties and the trade union movement, President Jagdeo referred it to the joint bauxite committee.

The joint committee submitted two sets of recommendations to President Jagdeo and PNC/R leader, Desmond Hoyte, and agreed to the establishment of the negotiating team to engage Alcoa and the Bermine Employees Group.

The team met the Bermine group early last month but Alcoa delayed its meeting until this month when it revealed its view of the industry and the prospects for the continuation of the ABC operations.

ABC is a 50:50 joint venture between Guyana and the then Reynolds Mining Company which has since been taken over by Alcoa. The joint venture was sealed in 1990.