Feb. 14 (Bloomberg) -- Vietnam National Coal-Mineral Industries Group, the state-owned mining company, is in talks with partners Aluminum Corp. of China Ltd. and Marubeni Corp. for sales from the country’s first alumina project.
Vinacomin, as the company is known, will begin production at its alumina plant in Tan Rai of Lam Dong province in the Central Highlands early in the second quarter, Deputy General Director Nguyen Van Bien said in an interview in Hanoi yesterday. The Tan Rai bauxite mine is one of two the company is developing.
Vietnam is preparing to start production of alumina, which can be smelted into aluminum for use in cars, packaging and houses, when global producers of the lightweight metal are idling capacity as energy costs soar and prices slump. The Hanoi-based company’s development of bauxite mines has been criticized by war hero Vo Nguyen Giap and activists who say that they pose environmental and national security risks.
Marubeni helped Vinacomin arrange a $300 million syndicated loan from overseas banks and a lending agreement will be signed early this year, Bien said. Aluminum Corp., or Chalco, was the engineering and construction contractor for the project, he said.
The two companies began talks with Vinacomin last year to buy alumina produced from the project, though a purchase agreement hasn’t been signed yet, he said. An agreement would be linked to progress on building the plant, he added.
While Vinacomin is counting on long-term demand and may produce aluminum after 2015, Alcoa Inc., Rio Tinto Group and their global rivals are cutting production of the metal after prices dropped last year, curbing profits. Alcoa, the largest U.S. producer, said China may use 70 percent of its capacity in 2012.
Aluminum for delivery in three months declined 30 percent to $1,962 a metric ton in mid-December from a peak of $2,797 in May on the London Metal Exchange. The metal climbed 13 percent since then to $2,210 yesterday.
“Drops in the aluminum price are only temporary,” Bien said. “Minerals are non-renewable resources so the mining and refining of bauxite and alumina is significant in the long run.”
Alumina output at the Tan Rai plant will reach 300,000 tons this year and rise to 520,000 tons next year before attaining full capacity of 650,000 tons in 2014. Vinacomin’s second project in Nhan Co of Dak Nong province that’s under construction will start with production of 300,000 tons in 2014 and reach 650,000 tons in 2016.
“These two are pilot projects, so the sooner we finish them, the faster we can evaluate the aluminum industry in Vietnam,” Bien said. “They will give us clearer direction and will be advantageous to our decisions regarding future projects.”
Vinacomin needs about 30 trillion dong ($1.4 billion) to 40 trillion dong annually for project investment in the period through 2015, Bien said. The company plans to sell at least 1.5 trillion dong of domestic bonds within the first half of this year. It will focus on the coal, minerals and power businesses, Bien said.
The company forecasts pretax profit will fall to 6.28 trillion dong this year from about 8 trillion dong last year due to high interest rates, fluctuating input costs and unpredictable changes in the global economy, according to him.
Bauxite is refined into alumina, which is then smelted into aluminum metal. About four tons of the mineral is used to produce one ton of metal.
--Diep Ngoc Pham in Hanoi. Editors: John Chacko, Baldave Singh
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