Jamaica to offload stake in Windalco
Published:Friday | November 18, 2011 | 12:00 AM
- Kirkvine reopening not likely before March 2012
Steven Jackson, Business Reporter
Government plans to sell its seven per cent stake in West Indies Alumina Company (Windalco), which includes operations at Ewarton and Kirkvine, according to Philip Baker, a top economist at the Jamaica Bauxite Institute (JBI).
Valuators are currently tabulating the net worth of the assets.
The world's largest aluminium producer, UC Rusal based in Russia, controls the remaining 93 per cent.
"Currently, there is an independent valuation exercise being done on the seven per cent, but negotiations are still ongoing," Baker said, without revealing an estimate or interested suitors.
"It is obvious that UC Rusal could have an interest in it," said Baker, whose official title is JBI director of economics and projects. The divestment, he said, "is part of the whole budget process for the disposal of assets". Government wanted to divest its 45 per cent stake in Jamalco and its seven per cent stake in Windalco.
The global downturn, which began in 2008 and intensified in 2009, resulted in the near shutdown of Jamaica's alumina sector.
Currently, the Ewarton plant is operational, but the Kirkvine plant remains unopened since the downturn. Baker thinks production could restart by March 2012, provided separate negotiations are successful.
"The reopening of Kirkvine is contingent on the successful outcome of negotiations between the Government of Jamaica and the company, and on the favourable global industry market situation," he said.
Jamaica accounts for 6.5 per cent of the world's bauxite reserves, according to a recent United States Geological Survey study.
The restart at Kirkvine would allow industry production to return to its pre-crisis levels.
The bauxite-alumina sector earned the third-highest foreign exchange for the island at US$531.5 million in exports for 2010.
Jamaica appears on track to better that outcome, having racked up alumina export earnings of US$293.2 million and an additional US$68.4 million from bauxite over the first six months of 2011. The numbers reflected improved half-year performance of 73 per cent for alumina and 10 per cent for bauxite, according to latest balance of payment statistics published by the Bank of Jamaica.
Kirkvine previously missed a July 1 restart date.
"Negotiations are still protracted in terms of restarting. It is still inconclusive, but it could restart by the end of year or the first quarter of 2012," said Baker.
Igor Dorofeev, country manager for UC Rusal, did not respond to requests for comment for this story, but he was previously reported by The Gleaner in a story published September 23 as saying that high energy costs continue to be a stumbling block to the plant's reopening.
UC Rusal released quarterly results this week and credited Jamaica and two others for augmenting its alumina and bauxite production.
Adjusted net profit for the three months ended September 30, 2011 increased more than twice to US$290 million, compared to US$143 million in 2010 quarter.
"The increase in the volume was due to increased production at the Nikolaev alumina refinery in Ukraine, Windalco Ewarton plant in Jamaica, and Aughinish alumina refinery in Ireland," the company said.
Locally, UC Rusal also controls Alpart, which operates bauxite mines and an alumina refinery in Nain, St Elizabeth. Alpart was shut down in 2009 due to overcapacity in the alumina market, and remains mothballed.
UC Rusal in September acquired full control of Alpart, after purchasing the 35 per cent share in Norway's Norsk Hydro for US$46 million. UC Rusal bought its initial 65 per cent of Alpart in 2007 when it partnered with another bauxite company, Glencore.