Govt still mulling Linden bauxite sale deal
-Block 37 poses concern
By Nicosia Smith
Stabroek News
January 26, 2007
Bosai Minerals Group Ltd and Canadian firm IAMGOLD will have to wait until mid February to get an answer from the government on a proposed US$46M deal to sell IAMGOLD's 70% stake in Omai Bauxite Mining Inc (OBMI) and Omai Services Inc to Bosai.
In addition, the use of the resources at Block 37, an ore deposit at OBMI, is also still very much on the government's mind.
President Bharrat Jagdeo at a media briefing yesterday afternoon at the Office of the President told the media that by February 12 the government is expected to give its decision on the IAMGOLD and Bosai deal. The government is a 30% shareholder in OBMI and based on the shareholders' agreement will have to state its position on the deal.
On December 19, 2006 IAMGOLD announced its decision to sell Bosai its stake in OBMI as well as a power company, Omai Services Inc for US$46M (in the form of US$28M in cash subject to working capital and other adjustments and Bosai would also assume a US$18M third party debt held by IAMGOLD). IAMGOLD bought out Cambior, which previously owned the 70% stake in OBMI in November 2006, hence its ownership now of the OBMI assets. Concerns arose immediately that IAMGOLD would make a windfall from the sale as Cambior had bought the 70% stake for US$5M cash and US$5M in equipment. There was also a pledge to invest substantially in the bauxite company but it is unclear how much money was put into it by Cambior.
The President said that the Head of the Privatization Unit Winston Brassington has noted that more time was needed before a decision was given and on Monday, Brassington wrote to the parties involved seeking more information on the proposed deal.
It was also confirmed that the government is seeking information from Bosai about its plans for Block 37, a mineral deposit that is part of OBMI's assets.
The reason for seeing this plan for Block 37, said the President, is "to see if they (Bosai) are going to use it the way we want it used."
The President said that whichever company takes over OBMI, the government will not like to see that company sitting on a huge amount of ore and not utilizing the resource.
The government will like to see the company which succeeds in purchasing the stake in OBMI, using the ore to move towards an alumina plant and not just bauxite production, said the President. Having an alumina plant or an aluminum processing plant in operation here will provide thousands of jobs it was noted.
In addition, the government will like to see the company put safeguards in place for workers and provide assurances that it will not scale down its operations or shut down, thereby conferring an advantage on Bosai's bauxite producing companies in China.
The local bauxite although produced at a higher cost than the Chinese bauxite, is very competitive on the international market due to its high quality. However, stiff competition from Chinese bauxite - Bosai output included - on the international market forced OBMI to shut down for two months last year (July and August).
Stabroek News had reported that a reliable source had indicated that the government may have sought to have Bosai give up Block 37 to a subsidiary of the Russian company RUSAL operating here.
President Jagdeo also said yesterday that Block 37 was not promised to the Bauxite Company of Guyana Inc., a subsidiary of Russian company RUSAL.
Jagdeo also noted that while in Russia in the coming days he will meet with RUSAL, whose subsidiary is operating in the Berbice River to discuss the company's plans for an alumina plant here. RUSAL had indicated back in 2004, when it came to Guyana that if it was feasible the company would consider investing in an alumina plant. The president is expected to leave for Russia today.
Bosai Minerals' output and export volumes of Calcined Bauxite are No. 1 in Asia and No.2 in the world, according to its website. Established in 1994, Bosai owns a total of 16 plants and companies in Chongquing, Guizhou, Tianjin, Guangxi, Hong Kong in China and in Germany.