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.

Guinea To Probe Bauxite Privatisation

Guinean President Moussa Camara said he has asked the country’s Justice Ministry to consider legal action over a 2006 transaction that gave control of the Friguia bauxite and alumina complex to United Co. Rusal.

The Guinean government was paid a fraction of the amount the company was valued at by consulting firms, Camara said on state television late yesterday.

“Guinea has to exercise its rights by getting back this factory which belongs to it,” Camara said. “It is not a question of leaving this refinery, which has to serve future generations.”

Camara took power on Dec. 23 after a coup that followed the death a day earlier of Lansana Conte, who had ruled the west African country for 24 years. Conte’s government concluded the agreement with Rusal, and Camara’s government has said mining deals made with the previous regime will be probed.

“The decision has been made to establish a commission on the privatisation of Friguia, which will thoroughly study the situation and give its final conclusion,” Rusal spokeswoman Elena Shuliveystrova said by e-mail. “We, Rusal, welcome this decision because Rusal privatized Friguia legitimately and in full compliance with the legislation.”

Friguia has the capacity to produce 640,000 metric tons of alumina and 1.9 million tons of Bauxite a year, according to Rusal’s Web site. Bauxite, an ore, is used to make alumina, which in turn is used in the manufacture of aluminum. Guinea is the world’s biggest bauxite exporter.

Guinea agreed to let Rusal buy full control of Friguia, Rusal said in April 2006. Rusal, which had been operating the mine through a concession, bought 100 percent of Friguia from the state and acquired the 15 percent it didn’t already own in Alumina Co. of Guinea, which manages Friguia. The Russian company didn’t give a purchase price at the time.

Camara said Rusal paid $19 million for the assets, while consultants had valued it at $257 million. The president, who didn’t name the consultants, also said action will be taken against the Guineans who negotiated the transfer of the company to Rusal.

Guinean ministers arranged the sale without going through the national privatisation company, Momo Sacko, a government lawyer, said today, according to Reuters.

Anatoly Patchenko, the head of Rusal’s Guinean operation, has taken refuge in the Russian embassy in the African country’s capital, Conakry, Guinea’s state-owned radio reported.

Separately, Rio Tinto Group is considering developing an iron ore mine in Guinea, while AngloGold Ashanti Ltd. owns a gold mine in the country.

Source: Bloomberg

Rio Tinto-Chinalco Deal

WEIPA, QUEENSLAND: Bauxite. 2008 output: 20,006,000 tonnes Sale of 30% stake worth $1.2 billion Queensland. Sale of 50% stake worth $500 million.

YARWUN, QUEENSLAND: Alumina refinery, output in 2008 1,293,000 tonnes. Sale of 50% stake at a price of $500 million. . Rio's revised stake will be 50%.

BOYNE ISLAND, QUEENSLAND: Aluminium smelter, output in 2008 552,000 tonnes. Sale of 29.40% stake to raise Chinalco's stake to 49% at a cost of $450 million with Gladstone Power deal. Rio's revised stake will be 30%.

GLADSTONE POWER, QUEENSLAND: Capacity 1680 megawatts. Sale of 20.6% stake to raise Chinalco's stake to 49% at a cost of $450 million with Boyne Island deal. Rio's revised stake will be 21.50%

ESCONDIDA COPPER MINE, CHILE: Output in 2008 992,400 tonnes of copper in concentrate. Sale of 15% stake to raise Chinalco's stake to 49.75%. Rio's revised stake will be 15%. Value of deal $3.388 billion

GRASBERG, PAPUA PROVINCE, INDONESIA: Copper and gold mine. Output in 2008: 467,500 tonnes of copper in concentrate and 1.1 million ounces of gold. Sale of 12% stake to raise Chinalco's stake to 30%. Rio's revised stake will be 28%. Value of deal $400 million.

LA GRANJA, PERU: Copper and zinc project. Resource: 2.8 billion tonnes of Inferred Resources; grading 0.51 percent copper and 0.1 percent zinc. Sale of 30% stake worth $50 million.

KENNECOTT COPPER, UTAH: 238,000 tonnes of copper in concentrate and 200,600
tonnes of refined copper. Sale of 25% stake worth $700 million. Rio’s revised stake will be 75%.

HAMERSLEY IRON, WEST AUSTRALIA: Sale of 15% stake worth $5.15 billion. 2008 OUTPUT: 95.55 million tonnes. Rio’s revised stake will be 85%/

DEVELOPMENT FUND 1: sale of 50% stake worth $500 million

TOTAL $12.338 billion.