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Rusal's Ewarton mining licence also on the line - Paulwell, Rusal to meet today

Published:Friday | July 11, 2014 | 12:00 AM
The Windalco plant in Ewarton, St Catherine. - File

Daraine Luton, Senior Staff Reporter

ALUMINIUM GIANT UC Rusal says it is seeking the Jamaican Government's "support" to reopen the Kirkvine and Alpart plants, but Mining and Energy Minister Phillip Paulwell said he has lost patience with the Russian company and has signalled that he is prepared to go even further to revoke its licences for mining at Ewarton.

Paulwell has already advised the company on July 1 that he will be revoking licences for the Kirkvine and Alpart plants, if they fail to restart operations in six months.

The plants have been shuttered for five years, since 2009.

Rusal, in an email response to the Financial Gleaner, said restarting the Kirkvine and Alpart alumina plants "will not be possible without time-consuming and expensive re-equipment and modernisation that are necessary for converting them to coal or gas-firing".

The company also said it will be holding discussions with the Jamaican Government "in the near future" to work out a way forward.

"We believe the modernisation and the restart of closed plants are almost impossible without the support of the Government in the current situation," Rusal said, while adding that it "considers its Jamaican assets as strategically important and will keep on taking all possible measures to restart competitive production at the plants".

Paulwell told the Financial Gleaner that he will be meeting with representatives of Rusal in Kingston today, but said emphatically: "I am not going to withdraw this notice."

No patience

He said Rusal, which is the world's largest aluminium company, has not been definitive on either the level or kind of government support it is seeking, or what it is prepared to do in order to undertake the reopening of the plants.

"It has been too general; and every time we ask them for specific commitments in relation to the reopening of both plants, we do not get it. I have really run out of patience with them, totally," Paulwell said.

Mining operations at Kirkvine in Manchester and Alpart in St Elizabeth were stopped in 2009 at the height of the global recession. The minister has said the closures have left 200 million tonnes of bauxite reserves idling in the ground.

At the time, the crisis in the global aluminium industry was caused by a decrease in the demand of alumina due to unfavourable market conditions and high production costs.

In addition, bauxite companies have cited high energy costs as an impediment for doing business on the island.

Rusal said that since the suspension of operations at the mines, it has taken "all necessary measures to preserve the plants and keep them in good operational condition, with special measures taken to allow the further use of equipment safely in the future with a view to increased production".

However, Paulwell says Jamaica does not trust Rusal to follow though on investments needed to restart operations, but has continued to push for reopening, especially with the improvements in the global market.

The minister said that despite several meetings with the management of Rusal there has been very little progress as apart from making "good" presentations, the company was not prepared to give a definitive undertaking on steps that it would take to ensure the reopening of the plants.

"There is nothing that they have asked us to do apart from wait indefinitely, and I am not going to do that," Paulwell told the Financial Gleaner.

The minister noted that a 2016 timeline for reopening was placed on the table by Rusal but said the company was unwilling to enter into a formal contract, with built-in targets and prescribed penalties.

He said that had Rusal agreed to enter into a contact, he would have been prepared to wait until 2016.

Among the things Paulwell said were proposed, was for Rusal to apply for a permit from the National Environment and Planning Agency (NEPA) by the end of next August to construct a coal-fired plant to drive its operations.

"Every time they came with specific ideas and we say, 'Okay, let us now move to contractual stage with specificity', we got push back," Paulwell said.

Rusal, meanwhile, said the situation in the global alumina and aluminium market "is still tough", arguing that both the demand for alumina and the price "has continued to decrease in the Atlantic region", making it difficult for them to approach the reopening of Alpart and Kirkvine with certainty. The company said that in 2013 prices fell by US$30-40 per tonne.

"Despite this, the company continues to carry out its obligations taken in 2010 to maintain the production and employment at the loss-making Ewarton plant. Moreover, Rusal is beginning to implement the planned project to convert Ewarton to coal-firing that will guarantee the competitiveness of the plant for the long-term future," it said

The construction of the coal plant is a major condition for the extension of a relief from the payment of bauxite levy for the Ewarton plant. The regime extends to September 2015.

Paulwell told the Financial Gleaner that should Rusal fail to deliver on its obligation for the construction of the coal plant, the company stands to lose not only the levy concession but also its mining lease for that operation.

"We believe that in terms of where Jamaica is positioned now, we wouldn't have a difficulty in relation to reallocating reserves from Ewarton. They know that and that is the reason why they have given a commitment to do it and we are going to hold them to it, because if they miss that timeline, we are going to withdraw that licence as well. We are not going to allow them to take us for a ride," Paulwell said.

He said Jamaica has at least four sets of investors who have expressed positive interest in being part of the country's bauxite sector.