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HANOI, April 29 (Reuters) - Vietnam said it would go ahead with a bauxite project in a $460 million contract with a Chinese company, but it will not sell stakes in such ventures to foreigners, throwing doubt over an Alcoa Inc (AA.N) deal.
Vietnam holds the world's third-largest bauxite ore reserves of 5.4 billion tonnes in the Central Highlands and it should tap the resource, Le Duong Quang, deputy industry and trade minister, said in a government statement issued late on Tuesday.
Quang's comments followed a directive by the ruling Communist Party's Politburo on April 24 that said Vinacomin, Vietnam's top coal miner, should continue its Tan Rai complex in Lam Dong province and the Nhan Co project in Dak Nong province.
Vinacomin's Tan Rai bauxite complex includes a $460 million alumina plant being built by China Aluminium International Engineering Co, the engineering arm of Aluminum Corp of China Ltd (Chalco) (2600.HK).
The Chinese company is building the operation under an Engineering, Procurement and Construction contract but will not take an equity stake in the project.
But Vinacomin will not sell any stakes in its bauxite projects to foreign investors, the Politburo said, a move that could cool the interest of Alcoa.
The two projects each aim to turn out 600,000 tonnes of alumina per year.
Last June Alcoa signed an agreement with Vinacomin to jointly conduct a feasibility study on the Gia Nghia bauxite project in Dak Nong province.
At the same time, Alcoa said AWAC, its venture with Australia's Alumina Ltd (AWC.AX), could acquire a 40 percent stake in Vinacomin's Nhan Co alumina refinery. [ID:nWNAS9067]
AWAC officials were not immediately available for comment.
Some scientists raised concern over the social and environmental impact of mining activities in the Central Highlands at an April 9 seminar in Hanoi.
The region, considered strategically important in Indochina, produces 80 percent of Vietnam's coffee output and is also a key area for commodities such as pepper, rubber, cocoa and cotton. Coffee is not grown on soil containing bauxite ore.
Deputy Prime Minister Hoang Trung Hai called in the seminar for tight control over mining activities.
Vietnam has said it needed about $15.6 billion to invest in major bauxite and alumina refining projects by 2025 to make use of its vast, largely unmined bauxite ore reserves, most of them in the Central Highlands.
Russia's UC RUSAL, the world's largest aluminium producer, has a deal with a Vietnamese firm to build a $1.5 billion alumina refinery using bauxite from Binh Phuoc deposit in southern Vietnam outside the Central Highlands.
Vietnam Bauxite reserves may be largest in world
The following article was published in Bloomberg Business Week on Nov. 24, 2010 (Bloomberg) --
Bauxite reserves in Vietnam may total 11 billion metric tons, enough to ensure the long-term supply to the country’s alumina industry, according to Prime Minister Nguyen Tan Dung.
The reserves are located mainly in the central provinces, Dung told the National Assembly in Hanoi today. Bauxite is refined into alumina, which is smelted into aluminum, the lightweight metal used in packaging, airplanes and construction.
Dung’s figure may make Vietnam’s reserves the world’s largest. The U.S. Geological Survey ranked Guinea as the top holder with 7.4 billion tons, while second-placed Australia has 6.2 billion tons, according to a January 2010 report that put third-placed Vietnam’s reserves at 2.1 billion tons.
“It’s generally recognized that there is a lot of bauxite in Vietnam, and it does hold great prospects for building an alumina-refining industry,” Alan Heap, global head of commodities research in Sydney for Citigroup Inc., said by phone.
Aluminum has gained 13 percent over the past year and traded today at $2,278 a ton on the London Metal Exchange. Prices may rise to $3,000 a ton in 18 months as China becomes a net importer, Harbor Intelligence said in a report this month.
Two Projects
Vietnam National Coal-Mineral Industries Group, the state- owned mining company known as Vinacomin, is developing two bauxite mines, one at Nhan Co in the central Dak Nong province with Aluminum Corp. of China Ltd., and the other in Tan Rai in neighboring Lam Dong province.
The Tan Rai mine may start producing commercial alumina by April, while Nhan Co will be in operation by the end of 2012, Dung said today. Duong Van Hoa, vice president of Vinacomin, had said in September that Tan Rai will produce 650,000 tons of alumina a year by late 2011.
The projects have been criticized by retired General Vo Nguyen Giap because of potential environmental damage and their use of Chinese labor. Giap, who led Vietnam’s victory over the French in the 1950s, wants work halted, according to a letter published by the VietnamNet online news service last year.
“The prime minister will reconsider the continuation of the projects after further assessments of the environmental safety issues,” Dung said. “Hungary’s experts have reported that the technology and sludge management in Tan Rai mine is modern and safe,” Dung also said.
A recent spill in Hungary of toxic sludge that was a byproduct of alumina production killed nine people. The torrent of toxic material was unleashed when a reservoir wall collapsed, and the red-colored flood eventually reached the Danube River.