Global Alumina Corporation’s (TSX: GLA.U) subsidiary, Global Alumina International Ltd (GAI), will receive US$260 million for a two-thirds stake in its alumina refinery project under development in the Republic of Guinea after sealing a joint venture deal with three international companies, according to an announcement late Monday that came as the company reported widened net losses for 2006.
Global Alumina is trying to develop the bauxite resources in a country with a third of the world’s supply of the mineral, to produce alumina for sale to aluminium producers.
In a release after stock markets closed Monday, the company said it had approved agreements to form a joint venture to develop and operate the proposed refinery and it will sell the two thirds to global mining giant BHP Billiton, Dubai government-owned DUBAL Aluminium Co. Ltd. and Mubadala Development Co., an investment firm owned by the Abu Dhabi government.
Earlier Monday, Global Alumina had reported net losses of US$19.5 million or 10 cents a share for fiscal 2006, up from US$17.3 million or 14 cents in 2005, as its board noted the company’s dire financial needs.
Its earnings report did not reflect any product revenues as the company moved to develop one of the world’s biggest green-field alumina refinery.
Significant financial highlights reported included:
-Construction-in-progress that rose US$116.5 million to US$192.3 million at December 31 from US$75.8 million at the same period in 2005.
-An aggregate of US$37.2 million received through warrants exercised in 2006 bringing the total gross equity raised to date to approximately US$248 million;
The joint venture transaction would enable the Company to continue implementation of the Project in accordance with the investment and concession agreement with the government of Guinea signed in 2004, said the company.
The US$260 million will be paid in four instalments and the joint venture will be effected through a share subscription agreement whereby each of BHP Billiton, DUBAL and Mubadala will subscribe to shares in Guinea Alumina Corporation Ltd., presently a wholly-owned subsidiary of GAI.
Following closing of the subscription, the ownership structure of Guinea Alumina will be 33.3 percent GAI, 33.3 BHP Billiton, 25 percent DUBAL and 8.3 percent Mubadala.
“The joint venture to be established by these agreements is one of Global Alumina’s most exciting developments in its quest to construct the world’s largest green-field alumina refinery in Guinea,” said Bruce Wrobel, CEO of Global Alumina.
He added, “Adding the financial and management resources of BHP Billiton, DUBAL and Mubadala, as well as DUBAL and Mubadala’s significant need for alumina driven by their aggressive aluminium smelter growth plans and BHP Billiton’s strong technical and operational expertise to Global Alumina’s highly qualified project development team and the extensive work the team already completed creates a win-win for the success of the prospective joint venture, the refinery project and Global Alumina’s shareholders.”
BHP Billiton, one of the world’s largest non-integrated producers of primary aluminium, is also the world’s sixth largest producer of primary aluminium, with a total operating capacity in excess of one million tons of aluminium, approximately 14 million tons of bauxite and four million tons of alumina per annum.
DUBAL, the owner of one of the largest single site aluminium smelters in the western world produces and exports primary aluminium products to more than 40 countries world-wide.
Mubadala controls more than 90 percent of the United Arab Emirates’ oil reserves. It invests in a wide range of strategic sectors that also include utilities, health, real estate, public-private partnerships, basic industries and services.
On Monday, Mubadala’s chief operating officer, Waleed Al Mokarrab Al Muhairi confirmed the deal to Reuters on the sidelines of the Middle East Investment Summit in Dubai saying the company wanted to secure supplies for its US$8 billion smelter it was building with DUBAL in Abu Dhabi that will have a capacity of 1.4 million tons a year, making it the world’s largest.
“Our comparative advantage is energy [which typically accounts for between 30 percent and 50 percent of the costs in aluminium production],”Muhairi was quoted by Reuters as saying. “Plants are shutting down in the West.”
Muhairi also told Reuters that Mubadala was also a partner with Canada’s SNC-Lavalin in a US$5 billion venture building a 700,000 tons-a-year smelter in oil and gas producer, Algeria.
Reuters quoted Muhairi saying that the Guinea purchase would supply around 30 percent of the Abu Dhabi aluminium smelter’s initial capacity of 750,000 tons a year and this would put the mining operation’s capacity at around 450,000 tons a year.