Saudi aluminium deal back on track with Alcoa

RIYADH - Plans to build the world's largest fully integrated mine-to-metal aluminium production complex in Saudi Arabia are back on track with U.S. producer Alcoa Inc (AA) as the new investment partner following Rio Tinto Alcan's withdrawal last year. The 40.5 billion Saudi riyal ($10.8 billion) production complex, a joint venture between Alcoa and the Saudi Arabian Mining Co. (1211.SA), better known as Maaden, will initially use 4.0 million tons of bauxite mined at Al Ba'itha, near Quiba in the north of the kingdom, to refine 1.8 million tons of aluminum at Ras Al Zour on Saudi's eastern seaboard. The plant's smelter has an annual aluminium production capacity of 740,000 tons, Maaden said late Sunday. The complex, which will be 60% owned by Maaden and 40% by Alcoa, will also house a rolling mill with an initial annual hot-mill capacity of between 250,000 tons and 460,000 tons. The project will be developed and financed in two phases, with the rolling mill and smelter in the first phase. First production from the smelter and rolling mill is anticipated in 2013, and first production from the mine and refinery is expected in 2014. Alcoa will arrange the supply of alumina to the smelter from outside the kingdom until the project refinery comes onstream, the U.S. producer said. The mill will focus initially on the production of sheet, end and tab stock for the manufacture of aluminum cans, and potentially other products for the construction industry. The project stalled last year after Rio Tinto PLC's (RTP) aluminium subsidiary said it couldn't finance its 49% stake in the project because of the global economic downturn. At the time, Rio Tinto Alcan said it would continue to provide technical and advisory support for the project. Alcoa said its 40% stake will be controlled through an investment partnership in which it will own 20% and its regional partners will participate through financing that represents the other 20% economic interest. Each of Alcoa and the partners will invest $900 million over a four-year period and will be responsible for their pro-rata share of the project financing, in addition to specific completion commitments. Maaden said in a statement on the Saudi bourse Web site it will seek financing for the smelter in 2010. Alcoa's Chief Executive Klaus Kleinfeld said the complex will be "a model for the growth of aluminum in competition with other metals and is designed with the potential for future expansion." In October, Maaden struck a deal with two state-backed utilities to merge a planned power and desalination project to supply energy to the planned aluminum complex with full government funding. Originally, Maaden had planned to build its own power generation and water desalination station to fire the complex. Ras Az Zawr also has 25 square kilometers of land set aside for industrial expansion and downstream industry. Maaden Chairman, Abdullah Saif Al-Saif, said the Saudi government's investment in critical national infrastructure is proving to be a catalyst for the aluminum complex and other projects. Maaden was set up in 1997 to facilitate the development of Saudi Arabia's non-petroleum mineral resources and to diversify the kingdom's economy away from the petroleum and petrochemical sectors.