Guinea Alumina Plant’s Construction Delayed After Aluminum Drop

May 12 (Bloomberg) -- Guinea Alumina, the $4.8 billion joint venture between BHP Billiton Ltd., Global Alumina Corp. and Dubai Aluminium Co., will start construction on its plant later than initially planned after aluminum demand plunged. Global Alumina, the Toronto-based company which holds 33 percent of the venture, is waiting for more favorable market conditions, said Karim Karjian, its chairman. The initial schedule was for construction to begin in the first quarter of this year, he added. “Our expectation is that we will start construction of the refinery within the next 18 months or so, towards the end of 2010,” Karjian said yesterday in an interview at the CRU World Aluminium Conference in Dubai. Progress will depend on costs, alumina prices and the availability of finance, he said. The 3.3 million-metric-ton-a-year refinery has been delayed after demand slumped for alumina, the raw material used to make aluminum. Aluminum producers including Rio Tinto Group, Alcoa Inc. and Norsk Hydro ASA, have cut output as prices dropped to a seven-year low. Alumina for immediate deliver has tumbled 48 percent in the past year. Guinea Alumina is continuing with earth-moving and the building of infrastructure at its site in the West African country, Karjian said. The refinery is expected to take about four years to build and start up, he added. Capacity may rise to 3.6 million tons within five years of opening, Global Alumina said in November. The project includes a mine producing bauxite, the ore used to make alumina. Sales Accord Global Alumina has signed agreements to sell some of its share of output and is in talks for the rest, Karjian said. Melbourne-based BHP, which also owns a 33 percent stake in Guinea Alumina, and Dubai Aluminium, also have off-take agreements for their shares, he added. Obtaining project finance is “difficult,” Karjian said. “We are still in touch with all the lenders, but that is not something that is being pushed through very actively as it was at one stage.” The cost of the project may fall because of lower prices for labor and equipment, he added. Guinea’s military leader Moussa Camara, who seized power in December after President Lansana Conte died, has threatened to close foreign-owned gold mines and is in dispute with London- based Rio Tinto over an iron ore deposit. The country has one- third of the world’s reserves of bauxite. “The new transitional government has been extremely supportive of our project,” Karjian said. “The change of government has had no negative impact at all.” To contact the reporter on this story: Brett Foley in Melbourne at bfoley8@bloomberg.net