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Vale to Spend $1 Bln on Alumina, Bauxite With Norsk (Update1)
Nov. 7 (Bloomberg) -- Cia. Vale do Rio Doce said its board approved a $1.04 billion plan to increase alumina and bauxite production, widening a joint venture with Norway's Norsk Hydro ASA as it expands beyond its main iron-ore mining business.
Vale said the plan includes an $846 million expansion of its Alunorte alumina refinery joint venture with Norsk Hydro, the world's No. 4 aluminum producer, in Brazil's Amazon. The project will make Alunorte the world's largest single source of alumina, an intermediate product for making aluminum. Vale will also spend $196 million boosting bauxite output at its Paragominas mine to supply Alunorte with aluminum ore.
Vale Chief Executive Roger Agnelli, 56, is using record profits, sparked by soaring Chinese demand for iron-ore and steel, to expand nickel, copper, aluminum, coal, clay, gold, and transport operations. Rio de Janeiro based Vale is the world's largest iron-ore producer and third-largest bauxite producer.
"This is a good time to expand in the alumina market because there is a gap in world supply,'' said Cristiane Viana, steel and mining analyst with AgoraSenior Corretora, Brazil's largest stock brokerage, in Rio de Janeiro. ``Right now Vale wants to concentrate in the primary and intermediate products such as bauxite and alumina and not in aluminum itself.''
Annual production capacity at Alunorte, in the state of Para, will be enlarged to about 6.26 million metric tons a year, Vale's spokesman Fernando Thompson said in a statement sent to journalists by E-mail today. The new capacity is expected to be ready in the second quarter of 2008.
Aluminum Prices
The bauxite expansion will allow Vale to increase production at its Paragominas mine in the Amazon to 9.9 million tons a year by the second-quarter of 2008, Vale's statement said. The mine, is expected to begin production of 5.4 million tons a year starting in 2007. Vale plans to eventually produce 14.4 million metric tons of bauxite at Paragominas, transporting it to Alunorte using a bauxite slurry pipeline.
Alumina prices have risen to the highest in at least 10 years because of rising production of aluminum, which is used in beverage cans, aircraft and car components. An expanded Alunorte will provide raw material for Hydro's planned 570,000-ton aluminum smelter in Qatar. Two tons of alumina are needed to produce one ton of aluminum.
Alumina spot prices have risen 20 percent in the past year to $485 a ton, according to data from U.K. publishing company Metal Bulletin Plc. Vale owns 57 percent of Alunorte and Hydro has a 34 percent stake.
To contact the reporter on this story: Simon Casey in London scasey4@bloomberg.net
Last Updated: November 7, 2005 10:48 EST