Noble Group buys JAMALCO as Chinese Aluminium demand rises – Why Noble Group BOOT's JAMALCO as GOJ keeps CAP and 381 MW Power Plant on track

“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 17^th 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 11^th 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!