Saudi Arabian Mining Co.'s Az Zubirah aluminum project is to cost 20% more than previously forecast, at $6 billion from the previously expected $5 billion, Chief Executive Abdallah Al Dabbagh said Tuesday.
The state-owned company, also known as Maaden, has delayed choosing a joint-venture partner for the project, and now expects to make a decision by the end of the year, not by the end of the first quarter as previously stated.
"The cost for the project is $6 billion - $4 billion for the aluminum smelter and $2 billion for the power plant which will feed the smelter," Al Dabbagh told Dow Jones Newswires on the sidelines of a business conference Tuesday.
Speaking to Dow Jones Newswires in November, Al Dabbagh said the mining company expected to choose an equity partner by March 2007, allowing it to complete the agreement before the end of its financial year on March 31.
He denied Tuesday that the higher cost of the project had caused the delay in choosing a partner.
"The interested partners are currently undertaking feasibility studies of the project. We are looking for companies that can add value - good technology, and potential downstream capability," Al Dabbagh said.
The completion date of the Az Zubirah integrated project - which includes a 3.3-million metric ton per year bauxite mine, a 1.4 million ton per year alumina refinery and a 620,000 ton per year smelter - has been pushed back a year to 2010, according to Al Dabbagh.
But Al Dabbagh said higher costs, which he attributed to soaring construction rates, will not prevent the project from going ahead.
"There is no chance it will be canceled. They have already started building the railroad," Al Dabbagh said, referring to the railway that will transport bauxite from central Saudi Arabia to Ras Al Zour, on the Persian Gulf coast, where the project's aluminum smelter will be built.
"We have a fixed rate for gas from the government, so we are within the lowest quartile in terms of production cost," he said.
Financing of the $2 billion power plant for the smelter could be done separately to the rest of the project, Al Dabbagh said.
"The power plant financing may be with Islamic financing, unlike the rest of the project," Al Dabbagh said. "We will decide this at the end of the year," he added.
Al Dabbagh also said Tuesday that Maaden is to decide on a joint-venture partner for the company's planned fertilizer project by the middle of the year. Previously, the company had said it would choose a partner by the end of 2006 for the project, which is now expected on stream in 2010, instead of 2009.
"The project will cost $2.6 billion. We will make a decision on our partner by the middle of 2007," Al Dabbagh said.
The international partner will help Maaden run the Al Jalamid phosphate mine in the north of the country, which will provide raw material for a fertilizer plant also to be built in Ras Al Zour.
"Sulfur will come from (national oil company) Saudi Aramco and gas from the government," Al Dabbagh said.
The phosphate will also be transported via the railroad to Ras Al Zour, where it will be converted into 3 million tons a year of diammonia phosphate, a fertilizer.
China and India are the target markets for the fertilizer plant's output, Al Dabbagh said.
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