Australia's Alumina expects to pay $1.7 bln to expand Brazil operations

MELBOURNE -- Alumina Ltd. said Thursday that, together with joint venture partner Alcoa Inc. (AA), it now expects to pay about US$1.7 billion for the expansion of its Brazilian operations, up from an original estimate of US$1.1 billion.

Alumina and Alcoa's AWAC joint venture is carrying out the expansion of the Alumar alumina refinery in Sao Luis and the establishment of a bauxite mine at Juruti along with partners BHP Billiton Ltd. (BHP.AU) and Alcan Inc. (AL).

Alumina chief executive John Marlay said the appreciation of the Brazilian Real has played a major role in the cost increase.

Marlay said the project was feeling the affects of a hot construction market and the tight contracting conditions in Brazil, which mirrored those being seen around the world.

"But principally the changes that we have seen there are more related to the changes in the Brazilian Real and the appreciation over the last 18 months of the Real in relation to the U.S. dollar," he said.

BHP Billiton last week announced its share of the project costs had climbed 40% to US$725 million.

Alumina Thursday said it expects AWAC expenditure on bauxite mining and alumina refining growth projects in 2007 will be about US$1.2 billion.

Marlay said this is likely to be the peak of AWAC's capital expenditure with most of the spend to be on the Alumar project in 2007.

He declined to give any further details of a possible off-market share buy back, which the company has said may take place in the first half of 2007.

Marlay said Alumina now plans to maintain its dividend at a rate of at least 24 cents per share a year, fully franked, and may consider further increases in the future depending on the growth of the business.