(Yicai Global) June 11 -- The world's second-largest alumina producer, Aluminum Corporation of China, better known as Chalco, signed a contract with the government of Guinea, a West African country, through its wholly-owned subsidiary in Hong Kong to develop a bauxite mine and construct other ancillary facilities. It aims to obtain long-term and steady imports of high-quality bauxite resources from overseas to guarantee raw material for its alumina business.
China Aluminum Hong Kong, Chalco's wholly-owned subsidiary, will be involved in the investment and construction of the bauxite mine project in Boffa near the Atlantic Coast, western Guinea, said the Beijing-based major aluminum developer in a statement to the Hong Kong stock exchange yesterday. Most bauxite, a rock refined to produce alumina, which is the core material to make aluminum, will be used in Chalco's alumina refineries in South China's Guangxi Autonomous Region and the eastern Shandong province.
The proven reserves the project covers are about 1.75 billion tons, of which about 39 percent is alumina and 1.1 percent silicon dioxide, it said. The winning bid amount, long years of raw materials supply security, high quality mine and the low production cost of downstream aluminum oxide processing are the main factors that make the project potentially profitable, the statement added.
The company will invest a total of USD708 million for mines, ports and lightering operations. Chalco Hong Kong will establish an independent investment entity and operating companies for each segment. The preliminary calculations show that the project capital is forecast to be no more than USD163.8 million on the part of Chalco, the statement said.
The total investment in the mines is projected to reach nearly USD475 million, with an estimated annual capacity of 12 million tons of bauxite, it said, adding the construction period will last 36 months.
The total investment in the ports is estimated to hit about USD112 million, which will be used for the construction of wharves for bauxite transport, lighter maintenance and handling facilities including tower cranes. The ports will be located at the southwestern corner of Boffa.
The company will also spend about USD121 million for the construction of harbor tugs, incremental launching and towing tugs, dumb lighters, traffic boats, offshore lightering platforms and cranes.
Construction of the three segments will kick off simultaneously.
The Guinean government or its wholly-owned company will own a 15 percent equity in the mining project company, which will not be diluted even if the mining company increases its investment in the future. The Guinean government also has the option to increase its shareholding in the company, which shall not exceed 35 percent.
The Guinean government will also have a 5 percent non-dilution equity in the port project company via state-controlled Societe Guineenne du Patrimoine Minier, or SOGUIPAMI, which will have the option of buying an additional 5 percent stake. The port company will also be entitled to bring in independent third-party investors.
Bilateral trade between China and Africa stood at about USD149 billion in 2016, according to China's commerce ministry, and is estimated to exceed USD200 billion at present. China is also the continent's largest creditor.
There has also been a surge in Chinese private sector investment in Africa, with more than 10,000 Chinese companies, most of them small and micro businesses, operating in the continent, according to a report by management consultancy firm McKinsey&Company last year.
Editor: Mevlut Kati