Alcan moves up a gear on Coega

13 July 2007

Canadian aluminium group Alcan has signed a contract worth more than US$100-million for the front-end engineering design of the first phase of the proposed Coega aluminium smelter, a decisive step in finalising a $2.7-billion investment in South Africa’s Eastern Cape province.

And according to Business Day, Anglo-Australian miner Rio Tinto has given assurances that its proposed takeover of Alcan would not affect the Coega smelter project.

Rio Tinto’s $38-billion offer for Alcan, unanimously accepted by Alcan’s board on Wednesday, overwhelmed a hostile $28-billion bid, made earlier this year by New York-based Alcoa, which some had feared would derail the Coega project.

Alcan spokesman Robert Valdmanis told Business Day that Rio Tinto “clearly values Alcan’s proposed project pipeline”, issuing instructions to move forward on projects, including the aluminium smelter project at the Coega industrial development zone outside Port Elizabeth.

Alcan signed a long-term energy supply agreement for the proposed smelter with state electricty company Eskom in November, and last month announced the appointment of Brent Hegger as CEO of the smelter project.

The $100-million engineering contract was won by a joint venture consisting of SNC-Lavalin, Hatch – both of whom already have offices in South Africa – and South African engineering and construction company Murray & Roberts.

The engineering team will be based in South Africa, after an initial start-up phase of approximately six months in Montreal, Alcan said in a statement on Wednesday.

The smelter’s front-end engineering design is expected to take nine months to complete “and will provide firm cost estimates and a critical path for construction, pending the notice to proceed from the Coega aluminium joint venture board,” Alcan said.

“The second phase of the project, which would bring aluminum production to an estimated 720 000 tonnes per year [the first phase is aiming at output of 360 000 tonnes a year], is also currently in development.”

The estimated total cost of both phases is $2.7-billion, Alcan said.

South Africa’s Industrial Development Corporation will have a 15% stake in the project, with an additional 5% reserved for black economic empowerment. Alcan “is also in discussions with additional potential partners,” but according to Business Day will retain a 25% to 40% equity stake in the project.

If the project goes ahead as planned, construction of the first phase of the smelter will begin in 2008 and come on line in 2010. reporter

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