SA's cheap power may attract $3.8bn smelter

Mumbai and Johannesburg - National Aluminium (Nalco), India's second-largest producer of the metal, may build a $3.8 billion (R25.8 billion) smelter in South Africa to benefit from low-cost electricity. The company planned to build a 500 000-ton aluminium smelter, complete with a power plant, said chairman CR Pradhan yesterday. The cost would halve if the company got power supply from the government, said Pradhan. Nalco said in March it might build a smelter in Indonesia or in Persian Gulf countries, including the United Arab Emirates, Qatar and Oman, to utilise abundant gas and low-cost labour. Electricity accounts for a third of the costs of making aluminium, used in car parts, aircraft and beverage cans. "It has not worked out in any of these regions because the terms set by their governments are not feasible," said Pradhan. "In South Africa we have asked for power supply. If that works out, the project cost will exactly halve." The country would help the firm secure supplies of raw material for the venture. The company produced 358 735 tons of the lightweight metal and 1.6 million tons of alumina last year. In another development, BHP Billiton is considering a $3 billion plan to build its largest aluminium smelter in the Democratic Republic of Congo (DRC). The plant would use about 2 000 megawatts of power from the proposed Inga 3 project, producing 800 000 tons of metal a year, the firm said yesterday. The investment would be the biggest in the DRC, which was attracting interest because of its mineral reserves and democratic elections last year. "This is saying that you can get cheap power, but you have to up the risk profile," said Paul McTaggart, an analyst at HSBC Holdings. "BHP can handle it because they are big enough." The Inga complex lies on the Congo river, the biggest in the world by volume after the Amazon. If fully developed, Inga has the potential to produce 40 000MW of hydropower. The investment would be a venture with the Congolese government. The mining company would fund a study into the development of Inga 3. The smelter would be built in the western Bas Congo province, near Kinshasa. "This is definitely a vote of confidence in the country's stability," Reg Rumney, an independent investment analyst, said yesterday. ''If BHP can get cheap electricity from Inga, it will be a big advantage for them," Rumney added.