JOHANNESBURG (Reuters) - Canada's Alcan Inc (AL.TO: Quote) is likely to start construction in early 2008 of an aluminum smelter in South Africa, where Russia's RUSAL is also keen on building a facility, the government said on Tuesday.
"Alcan will be proceeding with the smelter... construction will start during the first quarter of 2008," the Department of Trade and Industry (DTI) said in an e-mailed reply to a query.
Alcan, the second largest maker of primary aluminum, agreed a power-supply deal last November, but there had been no further word about when the $2.7 billion Coega smelter might go ahead.
Some analysts had speculated that Alcan was getting cold feet due to power problems in South Africa, where strong economic growth in Africa's biggest economy has not kept up with generating capacity and has led to sporadic blackouts.
"The project is proceeding as planned and concerns raised by Alcan have been dealt with to their satisfaction," the DTI said, giving no details about Alcan's concerns.
Alcan has said it plans to take a 25 percent to 40 percent stake in the smelter, due to have an annual capacity of 720,000 tonnes.
The government is current in talks with Alcan about "financial closure," which should be finalized in July or August, the DTI said.
Discussions with other potential shareholders in the project would then commence and the Alcan board was due to make a final decision on the whole package in December, it added.
Alcan inherited the plan for the smelter at Coega, near the southeastern port city of Port Elizabeth, when it took over French rival Pechiney in 2003.
Alcan's 25-year power deal with state energy firm Eskom, set to begin in 2010, provides for the purchase of up to 1,355 megawatts of electricity.
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