Century Aluminum Smelter To Proceed Despite Iceland Vote

LONDON--An expansion of Century Aluminum Co.'s (CENX) Nordural smelter in Iceland will go ahead as planned despite a local vote blocking the addition of a new potline at a rival smelter, the company said Monday.

The company is also pressing ahead with plans for a greenfield smelter in Iceland's south west, it added.

"We're progressing with our plans as scheduled," Century spokesman Mike Dildine told Dow Jones Newswires.

Dildine said expansion at Century's Norural smelter, in Grundartangi, is slated for completion in the fourth quarter 2007, with output to rise from 220,000 metric tons a year to 260,000 tons.

This will be the second expansion for the smelter, which increased annual capacity from 90,000 tons to 220,000 tons in 2006.

The company's Helguvik greenfield smelter project is meanwhile expected to start producing at around 150,000 tons a year, eventually rising to 250,000 tons a year. The project is in Reykjanesbaer municipality, around 30 miles from Reykjavik.

"We initiated the Helguvik project two years ago and we're going through the various stages of approval," said Dildine, noting an Environmental Impact Assessment is underway.

"Since the U.S. naval base in Iceland closed, we've been asked to accelerate our activities," he added. The Keflavik naval and air base left Iceland at the end of last year, ending a military presence dating back to 1951.

Dildine said relations with the local community are "excellent," and the company is working hard to be responsive.

The situation is in contrast with that facing Canada's Alcan Inc. (AL).

Over the weekend, residents of a small municipality just south of Iceland's capital Reykjavik voted against a planned $1.2 billion expansion at Alcan's Isal smelter in Straumsvik. The expansion would have boosted capacity by 280,000 tons, representing some 8% growth in the company's aluminum smelting capabilities.

Fears inflation would skyrocket once more and local opposition to an expansion led to the 'no' vote. Iceland has seen 18 interest rate hikes since May 2004 to the current record high of 14.25% - aluminum plant investment of about $3.75 billion is blamed for the rapid growth.