Johannesburg - Alcan, the world's second-largest producer of aluminium, would decide in June whether to go ahead with plans to build a $2 billion (R12.8 billion) smelter near Port Elizabeth, it said yesterday.

Local stakeholders in the project, including the government, the Coega Development Corporation, consulting firm Bateman, power utility Eskom and the Port Elizabeth Regional Chamber of Commerce and Industry, said they were pleased with the news that Alcan's decision would soon be forthcoming.

The smelter, which would produce 460 000 tons of aluminium a year at the Coega industrial development zone, was first mooted by French firm Pechiney in May 2002.

Prior to news last July that Alcan had launched a hostile bid for the company, there was little doubt Pechiney would go ahead, with the first metal due to be produced in 2006.

However, Alcan's successful takeover bid - finalised in February - put everything at risk as the Canadians would not commit to the smelter until they had done their own costings and due diligence.

Sivi Gounden, Bateman's chief executive and chairman, said he was still optimistic about the project: "We are of the view that the Coega smelter remains an attractive proposition."

Bateman, which was instrumental in convincing Pechiney that Coega was a good site, and German company Technip have the construction management contract for the smelter project. 

Lionel October, the department of trade and industry's deputy director-general in charge of enterprise and industry development, said the announcement reinforced what Alcan had told his minister, Alec Erwin, during a visit to Canada last month.

He would not be drawn on what he thought Alcan's decision would be, but did say the government believed the "business case for an aluminium smelter at Coega was very strong".

Eskom has entered into a long-term power supply contract with Pechiney, a deal that is crucial given the energy-intensive nature of aluminium production.

The state has also committed itself to building the deep-water port of Ngqura adjacent to the zone and to setting up infrastructure such as roads and rail links.

Richard Evans, Alcan's executive vice-president, said Coega represented "quite a unique opportunity because of the potential long-term power contract and the commitment of the government to support it with infrastructure", but the strengthening rand had raised Alcan's cost of building the plant.