Mon | Jan 21, 2019

What's in the UC RUSAL deal?

Published:Wednesday | December 24, 2014 | 12:00 AM

The expectation was that Mining and Energy Minister Phillip Paulwell would have announced an almost immediate reopening of the alumina processing plant at Alpart Nain, St Elizabeth or the revocation of UC RUSAL's mining rights.

Neither of those events happened as the Minister addressed a long-announced press conference at Jamaica House on Monday. Instead, two million crude wet tons of monohydrate bauxite will start shipping to Russia over an 18- month period, and the Alpart plant will reopen on December 1, 2016.

These are just two features of a deal hammered out over a protracted period between UC RUSAL, headed by Country Manager Igor Dorofeev, and the Jamaican negotiating team headed by Dr Vincent Lawrence. There was confirmation of many anxious moments but in the end all were happy.

"Our engagement with UC RUSAL, though challenging, was without acrimony. We have arrived at this positive development with a deeper recognition of the issues that impact investments in the industry", reported Pauwell as he outlined the Cabinet-sanctioned deal. Word of the deal was making the rounds two weeks prior, especially as the clock was ticking down on a Paulwell-imposed deadline for the revocation of special mining leases granted to UC RUSAL.

These leases were encrusted with rust occasioned by dormancy since the three key bauxite/alumina plants - Kirkvine in Manchester, Ewarton in St Catherine, and Alpart Nain had been mothballed with only Ewarton re-opening after several concessions. Instead, UC RUSAL can haul out two million tons of bauxite ore over an 18-month period. Questioned whether this wasn't a gift, Dr Lawrence was quick to point out that when compared to overall projected ore consumption at Alpart of four million tons per year, two million tons was small. In addition, for the first time in a long while, Jamaica will extract full levy and full royalties.

"I don't think there is a company in Jamaica now that is involved in mining operations that pays the levy. This is a strong signal to those other companies in Jamaica that the time has come for the people of Jamaica to earn a lot more than we have been in relation to the resources of the country.", warned Paulwell in a shot over the bow of other agreements with concessions.

The Mining Minister, when pressed about safeguards in the agreement, indicated that there are several milestones on both sides that could scupper the deal for non-performance.

"The contract does provide for constant monitoring. Every three months we'll be meeting to assess where we are in terms of the timelines, and there are issues that will be raised to ensure that each three-month period we are on track," Paulwell assured. The Minister also outlined the elements of the deal:

  • Two million tons of bauxite ore over 18 months generating 250 jobs
  • Upgrading of port facilities in the Alpart area beginning 2015
  • Repairs to affected roads in readiness for the reopening of the refinery by the second quarter of 2016
  • The establishment of agreed energy solution for the reopened refinery
  • The recommissioning of the Alpart refinery is expected to generate 1,000-1,200 jobs between direct employees and contractors.

UC RUSAL will be spending approximately US$400 million on the deal ($110 million on port/storage/transportation and infrastructure and $200 million on the power plant).

In return Jamaica is guaranteeing 30 years bauxite reserves to meet the opened plant's capacity of 1.65 tonnes of alumina.

At the press conference there were smiles all around but none broader than that of Mining and Energy Minister Phillip Paulwell as he declared that "our best years in this industry are ahead of us".

A section of the Alumina Partners of Jamaica (Alpart) plant at Nain in St Elizabeth, which has been closed for the past five years.  - File