Ja­maica's gov­ern­ment plans to sell its stake in baux­ite pro­duc­er and alu­mi­na re­fin­er Claren­don Alu­mi­na Pro­duc­tion Ltd (CAP) to a Chi­nese com­pa­ny, said Prime Min­is­ter Bruce Gold­ing.

Gold­ing told par­lia­ment last Tues­day that ne­go­ti­a­tions were ad­vanced for the sale of the gov­ern­ment's 45 per cent stake in CAP, al­so known as Ja­mal­co, to Chi­nese com­pa­ny Zhuhai Hong­fan. The oth­er part­ner in Ja­mal­co is Al­coa Inc AA.N, which owns 55 per cent of the shares. "We have en­tered in­to an agree­ment with a Chi­nese firm, Zhuhai Hong­fan, for the sale of CAP," Gold­ing said, adding: "The sale is sub­ject to the in­her­ent right of Al­coa, our joint ven­ture part­ner in Ja­mal­co, which has a 90-day right of first re­fusal."

Gold­ing said Zhuhai Hong­fan had an alu­mi­na sup­ply con­tract with the Alu­minum Cor­po­ra­tion of Chi­na (Chal­co), the coun­try's top alu­mini­um mak­er, and had al­so se­cured fi­nanc­ing com­mit­ments from the Chi­na De­vel­op­ment Bank. "Hong­fan is al­so com­mit­ted to ex­pand­ing the Ja­mal­co plant from 1.2 mil­lion tonnes to 2.7 mil­lion tonnes, pro­vid­ed ad­e­quate long-term baux­ite re­serves can be as­sured," Gold­ing said. "Rep­re­sen­ta­tives of Hong­fan, Chal­co, Chi­na De­vel­op­ment Bank and Al­coa met in Ja­maica last week and we are op­ti­mistic that the agree­ment will be con­sum­mat­ed," he said.

Baux­ite, alu­mi­na bad­ly hit

Ja­maica's strate­gic baux­ite and alu­mi­na ex­port sec­tor was bad­ly hit by the glob­al eco­nom­ic down­turn that re­duced in­ter­na­tion­al de­mand, forc­ing sev­er­al plants on the Caribbean is­land to halt or slash pro­duc­tion and lay off work­ers. Claren­don Alu­mi­na Pro­duc­tion, lo­cat­ed in the cen­tral parish of Claren­don, was the on­ly one not to cut out­put or lay off work­ers. Gold­ing said that de­spite the plant's rel­a­tive­ly high lev­el of ef­fi­cien­cy, the gov­ern­ment found that it was still los­ing mon­ey on every tonne of alu­mi­na pro­duced, and the gov­ern­ment stake had be­come a heavy bur­den on tax­pay­ers.

He blamed this on "fixed-price for­ward sale con­tracts en­tered in­to be­tween 2002 and 2005," which were then af­fect­ed by the up­ward move­ment in pro­duc­tion costs and down­ward move­ment in alu­minum prices. "The gov­ern­ment has had to pro­vide a to­tal of US$176 mil­lion to meet CAP's oblig­a­tions to Ja­mal­co. And that is in ad­di­tion to as­sum­ing US$369 mil­lion of debt for monies bor­rowed through CAP to help fi­nance past bud­gets and cov­er its share of cap­i­tal in­vest­ment costs," he said.�

Re­duced ex­port rev­enues

Re­duced baux­ite and alu­mi­na ex­port rev­enues was one of the fac­tors that forced Ja­maica to en­ter a US$1.27 bil­lion stand­by loan agree­ment with the In­ter­na­tion­al Mon­e­tary Fund in Feb­ru­ary, in a bid to shore up its vul­ner­a­ble econ­o­my against eco­nom­ic shocks. There are some signs how­ev­er that the out­look might be im­prov­ing for the Ja­maican baux­ite and alu­mi­na sec­tor.

Min­ing and En­er­gy Min­is­ter James Robert­son said this week that Russ­ian alu­minum pro­duc­er, UC Rusal, would restart in June pro­duc­tion at its Win­dal­co Ewarton baux­ite and alu­mi­na re­fin­ery in Ja­maica, which closed its doors last year. The planned re­open­ing, six months ear­li­er than ex­pect­ed, was due to im­prov­ing glob­al de­mand, Robert­son said.�

(Reuters)