Jamalco refinery output falters, awaits insurance payout
Published:Wednesday | November 3, 2021 | 12:06 AM
The Jamalco refinery recorded a US$7.6-million loss, or about $1.2 billion in local currency, in the September quarter, when its alumina plans at Hayes, Clarendon, was hobbled by fire.
Production dropped by half to 300,000 tonnes during the July-September period, less than half of the 700,000 tonnes achieved in the comparative period in 2020. Over nine months, January to September, production volumes amounted to 800,000 tonnes, down 40 per cent from 2.2 million tonnes, or 40 per cent lower.
“[There was a] substantial reduction in shipments since the Jamalco’s powerhouse was on fire on August 22, 2021, causing production to shut down,” said Hong Kong-based Noble Group, which operates Jamalco through a subsidiary, Asset Company.
Over nine months, Jamalco benefited from higher commodity prices, which improved its bottom line until the fire disrupted the gains. It still recorded a loss of US$6 million over nine months, but that was a better outcome than the US$9.5-million loss reported in the year-prior period. The third-quarter losses of US$7.6 million were disaggregated by the Financial Gleaner from the nine-month results.
Noble holds 51 per cent of Jamalco, while the Government of Jamaica holds the other 49 per cent through Clarendon Alumina Partners. The two owners have agreed to incorporate the assets of Jamalco into a stand-alone entity for possible listing on the Jamaica Stock Exchange. Noble said that the process of structuring the company to facilitate the listing will continue despite the fire.
“Both Noble and the Jamaican Government intend to use the reconstruction period to advance the process of Jamalco’s incorporation,” Noble said.
The Jamalco alumina refinery held US$250 million of insurance coverage prior to the fire in September, which Noble said includes damage from fire, business interruption and property damage.
“Discussions are ongoing to agree a first advanced payment from the insurers,” Noble said.
The fire broke out at Jamalco’s powerhouse, which acts as the engine of the plant. That’s why management had to shut down production and also cease alumina marketing. The conservative accounting of the assets at Jamalco, however, resulted in a modest impact on its balance sheet. The net assets at Jamalco, or its capital, stands at US$280 million, compared to US$288 million in 2020.
There was “modest balance sheet impact as the damaged assets were carried at cost less depreciation. Reconstruction process under way, targeting a return to production by the end of second quarter 2022 funded by Jamalco’s comprehensive insurance policy,” Noble said
In early October, Noble announced a three-tiered recovery plan for Jamalco. It will cost nearly $3 billion, initially, just to get the plant back to half capacity by next June. Jamalco then expects to ramp up production shortly thereafter, and then make a decision regarding a new powerhouse.