Alumina plant faces obstacles
Infrastructure and energy key issues
Stabroek News
May 30, 2004
The government has already scouted three possible sites for a local alumina plant that could be used for interested investors although the obstacles to making it a reality are enormous.
Commissioner of the Guyana Geology and Mines Commission (GGMC), Robeson Benn says refurbishing the Linden refinery remains on the cards, though he notes that new circumstances may dictate that a plant be closer to the ore supply.
His comments come only days after Trinidad and Tobago's Prime Minister Patrick Manning said that his government wants the construction of an alumina plant in Guyana as one of its conditions for negotiating aluminium expansion in Trinidad. Manning on Monday signed a memorandum of understanding with the world's largest aluminium company, Alcoa, to construct a $1 billion aluminium smelter plant. The announcement comes at a time of soaring aluminium prices spurred on by increased demand from China.
But Manning has said that Trinidad and Tobago will not be importing raw bauxite for the plant, but needs the refined alumina thus leaving Guyana out in the cold. Instead alumina plants in Jamaica and Suriname stand to benefit. However, Alcoa has agreed to examine setting up a plant here. Despite Manning's wishes, Alcoa's dealings in Guyana have not always been smooth. In 2001 the company suddenly agreed to sell its stake in Aroaima Bauxite Company to the government for US$1 after it had originally signalled it wanted to take over Bermine Mining Enterprise, a move that was met with strong resistance from the unions.
Prime Minister Samuel Hinds, while cautious about speculating on future talks, told Stabroek News he hoped that Guyana does find an investor for a plant.
Benn notes that the prospects of a local plant have been on the cards for years and he thinks it would boost the government's efforts to return the bauxite industry to its former glory. He describes Manning's interest as great encouragement, while noting that the government has been quietly examining the issue over the last few years.
Benn, who explains that the government is still evaluating its options, explained that one of the major considerations is the refurbishment of the alumina plant at Retrieve in Linden.
He says there have been attempts to maintain the facility over the years, but notes that there are new considerations, including the construction of a plant closer to ore deposits in the Berbice River. He said accessing cheaper power is also a major factor.
The refinery has been closed since 1982 and the prospects for its renovation have been described as bleak.
"...I think this is a long, long shot and the probability of it ever materialising should be evaluated in the context of its economic viability...," said Sylvester Carmichael in a recent letter to Stabroek News about rehabilitating the plant.
Carmichael noted that he had participated in a study on the matter six years after its closure which found the project to be marginally economical when evaluated against the cost for establishing greenfield refineries and brownfield expansion.
He said at the time rehabilitation and upgrades could have been effected at a relatively low cost. Fifteen years later he says he is unfamiliar with the state of the plant structure.
But he notes that the steam power plant that generated electricity no longer exists, the railway lines bringing ore from Ituni were sold, the heavy mining equipment was parked and reportedly cannibalised, while the Demerara Transhipment Station no longer exists.
"I suspect, however, that with significantly reduced cost of brownfield capacity at this time, the higher cost of rehabilitation of the plant and the supporting facilities and the low operating costs of giant alumina refineries now in existence, the economic viability of the refinery would be questionable," Carmichael concluded.
The Guyana Bauxite and General Workers Union's President Charles Sampson believes that the Linden facility remains the best option, though he admits that it will require significant investment for renovation and more importantly, expansion.
Sampson, who worked at the plant until it closed, says that it was allowed to deteriorate over the years and a loading facility would also have to be re-established.
He said the plant was only capable of producing a maximum 300,000 tonnes per year while the minimum needed now would be 500,000 tonnes.
Sampson believes that an investment in the construction of a plant here would be profitable, though he notes that the cost of power would have to be watched closely.
Benn adds that sites at Berbice and at the Kopinang basin in the Pakaraimas are also options, though he notes that the latter would entail tremendous investment, especially for infrastructure.
He points out that when compared with deposits in Berbice there is less overburden to strip, although he admits that the quality is lower.
Officials from the Russian company, RUSAL, and more recently Brazilian company, Companhia Vale do Rio Doce (CVRD) have been in Guyana showing strong interest in metal grade bauxite. CVRD wants material for their refinery in Para state. Talks are ongoing on how ABC could expand its production to meet the extra demand given a lack of infrastructure and limits on barge capacity on the Berbice River.
In other developments, CVRD on Monday signed a framework agreement to build a US$1B alumina refinery in north-eastern Brazil with the Aluminium Corporation of China Ltd.
Meanwhile, Carmichael said he was bowled over by the recent budget speech that referred to a company expressing interest in 35% extractable bauxite deposits from the Pakaraimas. He thinks the probability of anyone developing these deposits in the current state of the world bauxite resources and planned developments in the industry, is close to zero.
Sampson also points out that while other potential sites exist, shipping costs would have to be carefully weighed.
Benn admits that the government still has to do more evaluation to get a better picture of its resources, which need to be developed particularly in Linden, Ituni and Kwakwani. Guyana's industry has declined over the years. Only now has there been a strongly increased demand for aluminium with China now one of the largest producers and consumers.
Aluminium consumption worldwide in 2003 increased by 7.68% to 27.2M tonnes with China's demand growing by 25.2% from 2002. At the same time production of alumina, or refined bauxite, used to make aluminium, went up by 7.2% in 2003 with China's imports going up by 22.6%. Growth up to 2010 is projected at 4% per year while bauxite output is estimated by some analysts at 2.5% to 3% per year.
ABC has yet to see the full benefits of recent price increases because of a long-term contract signed with its main customer, a refinery in Point Comfort, Texas run by Alcoa.
However, there are escalators in the contract, which runs until 2006, that have seen prices rise by around 15% from early 2003. Given that the base price had been negotiated to achieve a cash neutral position, this is a welcome development but ABC is also smarting from a strike that set back production and cost it US$500,000 in demurrage costs. Production for 2004 up to the end of February is 205,810 MT, missing the 288,000 MT target. But the original general manager, Morris Stuart is now back in charge and the company is looking to gain lost ground.