GOJ negotiating Jamalco sale with Glencore, Drops talks with Hong Fan
Published:Friday | January 21, 2011 | 12:00 AM
Jamaica is now trying to sell its stake in Jamalco to Glencore International AG, after industry experts frowned on the Chinese deal, different sources with knowledge of the negotiations tell the Financial Gleaner.
Prime Minister Bruce Golding initially signalled the shift in his New Year message.
"We have entered into a new agreement to divest our assets in Jamalco," he said.
Subsequent checks with industry sources confirmed that the Government was no longer negotiating with Hong Fan of China, but had turned to Swiss company Glencore.
"The agreement negotiated includes the cancellation of the forward-sale contracts which have cost taxpayers more than J$12 billion since they were entered into in 2002, and which were projected to cost us another J$15 billion before the contracts come to an end in 2013," Golding said.
Jamaica began negotiating the sale of its 45 per cent stake of Jamalco with Hong Fan last year, with Golding announcing in his budget speech that a deal was close, but would be subject to Alcoa's approval.
But sources said this week that as the discussions advanced, concerns began to emerge within the industry on whether Hong Fan, chiefly a trading company that specialises in the production and sale of metallic elements, had sufficient background experience in the tough bauxite-alumina business to be a strong partner to Alcoa, which owns 55 per cent of Jamalco.
The Golding administration could not turn a deaf ear to the chatter, the Financial Gleaner was advised, because under the 'first right of refusal' agreement with Alcoa - which gives the company 90 days in which to object - it would have to present a strong case for the American company not to give a thumbs down to the arrangement.
The Jamalco holdings are reposited in Clarendon Alumina Production Limited (CAP), whose share of the refinery amounts to around 650,000 tonnes of the plant's 1.45 million tonnes of capacity.
Ongoing talks
CAP, which earns revenue of about J$11 billion annually from Jamalco, was around J$33 billion (US$382m) in debt up to the close of fiscal 2010.
Mining and Energy Minister James Robertson did not return several calls for comment, and his state minister Laurie Broderick was unwilling to entertain discussions on how the debts would factor into the negotiation.
"It's not at a point that we should be making disclosures, but the talks are ongoing," Broderick said.
Alcoa Minerals has not weighed in publicly on the discussions, nor has it signalled whether it favours the Chinese or Glencore. Its Jamaican spokesman Leo Lambert said its position is to offer no comment.
Efforts at reaching Glencore representatives were unsuccessful.
A deal with Glencore would put the Swiss company in the position of being both Alcoa's partner and its indirect rival through its 8.8 per cent interest in UC Rusal, which controls the majority of Jamaica's bauxite assets.
The GOJ-Glencore transaction is expected to include an accommodation on the forward-sale agreement with Glencore that carries a fixed-price component on some of the supplies, and which has become expensive for Jamaica to service because, as oil prices climb worldwide, the cost of producing the alumina now outweighs the sale price.