“I
think there is a realisation that if you are a major producer of alumina you
have to have some security of supply. I think there will be more and more
efforts made to do long-term contracts in this business, and Jamaica is an
important location globally. It is in a strategically important logistics
position and it has excellent resources of bauxite”
Executive Director in
charge of Resources Operation at Noble Resources UK, Mark Hansen commenting on
Noble Resources UK acquisition of ALCOA stake in JAMALCO in October 2014 to the
Jamaica Gleaner
The
Ministry of Science, Technology Energy and Mining has announced great news for
the Alumina Sector that heralds a coming revival as well as Cheaper Energy.
Singapore-listed
Noble Group on Friday October 17th 2014, has announced that it is
acquiring all of AML (ALCOA Mineral of Jamaica) stake in JAMALCO for roughly
US$140 million as started in the article “New
direction at Jamalco - Jamaica shelves plan to sell CAP”, published Friday
October 17, 2014 by Daraine Luton, Senior Staff Reporter, The Jamaica Gleaner.
The
Noble Group has so impressively strong numbers:
1.
US$98-billion valuation by revenue
2.
US$1.4 billion operating profit in 2013
3.
US$243 million net profit in 2013
This
new deal results in the ownership of JAMALCO via the partnership called CAP (Clarendon
Alumina
Products) appearing as thus:
1. 55%
AMJ
2. 45%
Government of Jamaica
It's
good to note that Noble Resources UK, their UK subsidiary, had spoken to ALCOA
wand has already agreed to take control of ALCOA stake in JAMALCO since Friday,
July 11th 2014 as explained in my blog article
entitled “JAMALCO
sold to Noble Resources Limited as ALCOA pulls out – UC Rusal stalling on
ALPART and Kirkvine refineries as Xinfa Group Company interested”.
ALCOA
will retain the management of the Plant during a three (3) year transition
period being as this is Noble Resources UK first acquisition of a production
facility as opposed to just buying the commodity for resale.
ALCOA,
now as steward to Noble Group, will be relieved that they no long have to
endure bleeding some US$100 million on an Alumina Plant that wasn't profitable
as they focus on Alumina recycling as well as more lucrative places like Saudi
Arabia.
For
them this is a global trend, as they're also winding up operation in places
like Brazil where they are scaling back on production by some 149,000 tonnes of
smelting and closing Port Henry in Australia in August 2014, reducing
production there by some 190,000 tonnes of alumina.
Noble Resources UK buys
ALCOA stake – Coming upswing in Aluminium demand from China
The
reason for Noble Group’s investment at a time when ALCOA is trying desperately
to get out of Alumina Mining?
Executive
Director in charge of Resources Operation at Noble Group, Mark Hansen, states
that the long-term economic outlook suggests that the price of alumina is going
up as the supply-demand economics is shifting to favour the producers, quote: “There
is tremendous growth in emerging markets like China for aluminum products. At
the same time, it is becoming more and more difficult to extract bauxite in
certain places. You have countries like Indonesia which have banned raw
material exports.....You have the closure of refineries in places like
Australia. When you look at all that, the supply and demand balance is shifting
in favour of the producer”.
Fact
is, really, the price of Oil is coming down because OPEC (Organisation of Oil
Producing Exporting Countries) is allowing it to happen as noted in the article
“New
Uncertainty For Caribbean As Saudis Let Oil Price Fall”, Published Sunday
December 28, 2014, The Jamaica Gleaner.
Apparently
that’s good news for the Bauxite Industry, as we're past the worst according to
Executive Director at Noble Group, Mark Hansen, quote:“We believe that the
industry is on the upswing. When you look at the economics, we have seen the
worst days.......We have prepared ourselves for the worst and so we know what
the conditions are. I think we have seen as bad as conditions can get. The oil
price is coming down. (That) coincides with bauxite and alumina pieces rising.
So I think that there is a chance here that we have seen the worst here in this
business cycle”.
Thus
their buying of the 1.45-million tonne capacity JAMALCO refinery gives them not
only access to Alumina for sale to capitalize on its coming upswing in demand,
but also control over the supply and managing the costs of its production at
source.
To
quote Executive Director at Noble Group, Mark Hansen: “We are already a
substantial lender and supporter of CAP, and I feel it is in a good improving
position that is probably to the benefit of the Government and people of
Jamaica to see it through better times. We are buying a refinery which we think
is positioned best on the island with the best reserves, best workforce,
opportunities for modernisation - including Energy solution - and we want to
become a stewards of that plan and with our partner CAP become a strong,
independent local enterprise”.
So
they clearly plan to modernize the JAMALCO Plant in anticipation of a boost in
demand from China and East Asia and the continuing fall of Oil Prices. This
even as Alumina Mining Companies like ALCOA and ALCAN are running away from
Alumina and aluminum Production.
So
what are the plans for Noble Group for the JAMALCO Plant? And how does the GOJ,
owner of debt-ridden CAP (Clarendon Alumina Partners) benefit from this arrangement?
Noble Group BOOT – IMF
confident as GOJ expresses desire not to ditch CAP
The
Noble Group's plan sounds a lot like the plan that had been negotiated with
ALCOA back in April 2012 by a team by Prime Minister Portia Simpson Miller and
including the likes of Minister of Energy and Mining Phillip Paulwell, Chairman
of Clarendon Alumina Partners, Dr. Vin Lawrence and Mining Industry expert Dr.
Carlton Davis as stated in my blog article entitled
“PM
Portia Simpson Milller ALCOA Talks hint at LNG - Lady Gaga's Paparazzi in
Jamaica’s Bauxite Sector”.
In
short, they basically planning to build a LNG Power Plant under an arrangement
called BOOT (build, own, operate, transfer). This would see them investing some
US$150 million and US$200 million to build a 50MW Power Plant, according to minster
of Science, Technology, Energy and Mining, Philip Paulwell.
His
comments fit with those of critics who estimate that a new more Energy efficient
Plant with as cheaper source of Energy than Bunker C Oil was needed to get the
price of Energy to around US$0.12 per kilowatt hour to produce, resulting US$50
per tonne reduction in the cost to produce a tonne of alumina.
Granted,
to his benefit, the Executive Director at Noble Group, Mark Hansen made no
mention of the cost of such a Plant, muchless whether or not it was Powered by
LNG or even its output capacity, albeit he left open the possibility of coal,
quote: “We are assessing (whether it is) gas or coal. Coal is obviously the
cheapest and the fastest option that can be brought to the table”.
Interestingly
too, Noble Group's Plans for a LNG Plant coincide with support for Dr. Vincent
Lawrence led six-member ESET (Electricity Sector Enterprise Team) plan to get
JPS Co (Jamaica Public Service company), UC Rusal owned ALPART and Noble Group
owned JAMALCO to upgrade their Power Plants to either Coal or LNG as part of
the 381 MW Power Plant Network by 2017 as explained in my blog article entitled
“Dr.
Vincent Lawrence ESET sets 2017 for 381 MW Project - Why JPS Co says LNG even
though Ethane and Propane cheaper as Hydrogen Economy possible”.
Executive
Director at Noble Group, Mark Hansen hinted as much, stating that Noble Group “would
work closely with CAP and the Jamaican Government to find out how we can effectively
and efficiently implement something, because Energy is going to be the key part
of that business”.
Noble Group’s BOOT –
JAMALCO retooled and LNG Plant for 381 MW Power Plant Initiative
Because
of this Noble Group arrangement, Jamaica will be getting a Alumina Plant upgraded
for free and some 50MW added to the grid to make up the 381MW by 2017, to quote
Minister Phillip Paulwell: “Jamalco will actually be purchasing Energy from a Plant
that has been established, and so that cost would allow Noble to recoup its
investment. And the Government of Jamaica will not be putting a cent in it”.
Best
of all, the IMF (International Monetary Fund) likes this arrangement, as it
implies that the GOJ will merely be a 45% stakeholder in CAP that reaps the
benefits of a potentially profitable partnership with Noble Group without investing
more tax revenue in the Plant.
With
Noble Group footing the bill for both the modernization of the JAMALCO Plant as
well as the building of a LNG Plant, IMF is no longer pressuring the GOJ to
sell their 45% stake in CAP. To put in the words of Minister of Energy and
Mining Phillip Paulwell, quote: “We now stand the real prospect of recouping
those losses by the emergence of Noble in Jamalco”.
It
better be profitable. CAP's 2013-14 fiscal year figures do not make for
pleasant reading:
1.
JA$2 billion in Losses
2.
JA$28 billion (US$250 million) in
accumulated deficits
3.
JA$5.5 billion in Cash transfers from
the GOJ over the past three (3) years
So
no more of Jamaican tax payer’s money is going into what effectively appears to
be a black hole for billions of dollars. The possibility is open for Jamaica to
just make pure profit after paying off the debt incurred above. More
importantly, we’ll possibly be getting a LNG Power Plant to boot in order to
switch to cheaper Energy via the 381 MW Power Plant Initiatives.
2015
is looking great for JAMALCO workers as things could not be better for CAP and
the Jamaican people who'll benefit from the Noble Group Deal! So what of a deal
from UC Rusal to re-open ALPART? More on that in another article in 2015, the
Year of the Sheep!
No comments:
Post a Comment