BHP-Billiton may invest in Coega

Posted On Wednesday, 23 January 2002 03:01 Published by eProp Commercial Property News
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Company views area as possible site for aluminium expansion plans, but is also considering other ports

Property-Housing-ResidentialGlobal resources group BHP-Billiton confirmed yesterday that it could build a $1,75bn aluminium anchor project in the Coega industrial development zone. 

Officials from the company have this week been in discussions with the trade and industry department and with Coega officials about the possibility of building a two-phased aluminium smelter similar to the Mozal I and II twin development in Mozambique. 

BHP-Billiton spokesman Michael Campbell said yesterday that the company was looking at Coega as a potential site for future expansion of its global aluminium operations. 

However, he said that BHP-Billiton was nowhere near a decision on this, and that it was also looking at other sites in SA and elsewhere. 

'Coega, and any other deep-sea harbour, could represent for BHPBilliton an opportunity to develop our next generation of aluminium smelters,' said Campbell. 

Billiton, as it was called before last year's merger with BHP, had earlier undertaken a feasibility study on a $1bn investment in a zinc refinery in Coega, but this was shelved, partly because of delays in the Coega development. 

However, the company was fully briefed on Coega, and was aware of the government's determination to make a success of the development. 

To date, German multinational Ferrostaal is the only industrial player to have pledged that it will be investing in the industrial zone at Coega, with at least one stainless steel beneficiation project, although there are still doubts about the scale of total Ferrostaal investments at the Eastern Cape site. 

BHP-Billiton announced last year that it was to expand its 250000-tons-a-year Mozal I smelter in Mozambique, and work is underway on the new Mozal II smelter. 

Meanwhile, the BHP-Billiton board is expected to approve an extension of 130000 tons a year to the company's Hillside smelters at Richards Bay within the next few months, with the new plant to be known as Hillside III. 

It would only be after considering this expansion that the possibility of a green fields investment at Coega would be advanced, and it could take several years before a BHP-Billiton smelter would be commissioned there. 

BHP-Billiton has developed aluminium smelters in SA and Mozambique because of cheap electricity, which is a major element in the cost of producing aluminium, and of tax breaks. 

However, key inputs coke and alumina have to be imported for SA aluminium production. 

There might therefore be attractions in looking at Australia or Brazil for BHP-Billiton's next aluminium project, as both countries have the necessary raw materials. 

If it is decided to build a new plant in southern Africa, BHP-Billiton would look at all ports from Beira in Mozambique to Saldanha Bay on the west coast of SA. 

'BHP-Billiton know a lot about Coega because they did a feasibility study on the zinc smelter there, and the decline in the rand would make it even more attractive to site an aluminium smelter there,' said Allan Cooke, an analyst at Rice Rinaldi Securities. 

'The two key issues are whether there will be an adequate supply of electricity at the right price, and how firm the demand will be for aluminium . Certainly, BHP-Billiton has plenty of experience with its Hillside and Mozal smelters, and could easily follow the same phased development at Coega. 

'They are the lowest cost producers of aluminium in the world.' 

BHP-Billiton gained R1 yesterday on the local bourse to close at R60,60.

Last modified on Wednesday, 25 June 2014 11:42

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