Norsk Secures Bauxite Supplies

Vale Deal Will Give Access to 100 Years of Supplies

Norway’s Norsk Hydro has agreed to take over bauxite, alumina and aluminum assets from Vale SA for $4.9 billion, securing 100 years’ worth of bauxite supplies and making the Brazilian miner its second-largest shareholder. Bauxite is refined into alumina, which is separated during smelting to produce aluminum.

The deal will give Hydro access to raw materials used in aluminum production and will enable it to become less reliant on mining companies supplying bauxite and alumina.

Hydro is paying $1.1 billion in cash, giving Vale a 22 percent stake and taking on about $700 million of net debt in return for the assets, the company said on Sunday.
Hydro is taking control of Paragominas in Brazil, the world’s third-biggest bauxite mine, and 91 percent of Alunorte, the largest alumina refinery, as part of the deal. The company will have a 51 percent stake in the Albras aluminum plant and 81 percent of the CAP alumina project.

Hydro’s Chief Executive Officer Svein Richard Brandtzaeg described the deal as a “transforming transaction” at a press conference yesterday in Oslo.
The assets will “significantly improve” Hydro’s financial position and secure bauxite supplies “in a 100-year perspective” according to a statement released by the company. Vale said yesterday it expects the transaction will create “substantial value” for shareholders.

The deal will bring the Norwegian government’s stake in Norsk Hydro down to 34.5 per cent from 43.8 per cent previously. The country’s Minister of Trade and Industry, Trond Giske, said Norway’s ambition is to bring the holding back up towards 40 percent.

Vale looks set to focus on expanding iron ore production. On Friday it said it was paying $2.5 billion for iron ore deposits in Guina from BSG Resources (Guinea) Ltd.