Jamaica reviewing two bids for Jamalco shares
Published:Sunday | September 11, 2011 | 12:00 AM
.... says Kirkvine soon to reopen
Daraine Luton, Senior Staff Reporter
The Jamaican Government says - in disclosures made by Finance Minister Audley Shaw to lawmakers Thursday - that the sale of its holdings in the Jamalco refinery is imminent, and that negotiations are ongoing with two parties.
Prime Minister Bruce Golding also said in the same forum that Cabinet is considering a proposal to reopen the Kirkvine plant in Manchester.
Jamaica's 45 per cent stake in Jamalco, held by Clarendon Alumina Productions (CAP), has been on the market for more than a year but reaching a deal has been complicated by its debt obligations to Glencore International.
"That process is within sight as the Government is currently evaluating two firm offers that are on the table for the divestment of CAP," said Shaw.
Well-placed sources within the bauxite sector say the two potential buyers are rivals Alcoa and Glencore, who have made separate offers.
Shaw has described the Government's 45 per cent stake in CAP as "an albatross around our necks".
The Government had expected to divest CAP this fiscal year, but having failed to offload the entity, was saddled with a J$5.3 billion obligation to accommodate deficits relating to the company.
Alcoa already owns the other 55 per cent of the refinery. Glencore is aligned to the Russian producer UC Rusal, which holds the title of world's largest player - a position once enjoyed by Alcoa. Rusal already controls about 60 per cent of Jamaica's bauxite assets, and a successful bid by partner Glencore is expected to cement that dominance.
Playing hardball
Well-placed sources say the prospect makes Alcoa and others in the bauxite sector nervous, especially with reports that UC Rusal has been playing hardball with the Jamaica Government to secure additional concessions for reopening Kirkvine.
Jamaica owns seven per cent of the shares.
"When Cabinet next meets, it will consider a proposal from the minister of energy and mining for a fiscal regime that would enable Kirkvine to be reopened," Golding told the Standing Finance Committee of Parliament Thursday night.
"The former minister (James Robertson) announced that it would reopen in July and we had expected that it would have. It did not because of some complexities that had to be resolved," Golding said.
"There were some issues having to do with mining rights because one of the things that we have to be careful about is that we don't allow any one plant to monopolise the choice bauxite. We have to make sure that we sustain all of the activities," he said. The PM said the State has accumulated US$17 million (approximately J$1.4 billion) of liabilities on Kirkvine.
"One of the significant things that took us so long is the money that we owe ... . Under an agreement that the member for South St Andrew (Dr Omar Davies) is not unfamiliar with, we are obliged to supply alumina from Kirkvine to Glencore. But every tonne of alumina that we took out of Kirkvine to meet that obligation to Glencore was costing us US$126 per tonne more ... and because we could not find it, that has accumulated arrears of US$17 million," the prime minister said.
Kirkvine ceased operation in April of 2009, eliminating 2,000 jobs, during the period when the bauxite industry worldwide was shedding capacity to deal with falling aluminium prices.