AluNews - September 2006

Kaiser announces $30 million expansion at Spokane aluminum plant

Seattle Post Intelligencer Wednesday, August 2, 2006

THE ASSOCIATED PRESS

SPOKANE VALLEY, Wash. -- Kaiser Aluminum Corp. plans a $30 million expansion at its Trentwood rolling mill here, but won't say whether it will mean more jobs.

The Foothills Ranch, Calif.-based company announced Tuesday it would add a third furnace at the Spokane Valley plant as part of a three-year plan to double its aluminum-production capacity.

The $30 million expansion is in addition to $75 million the company announced in November that it would invest in the plant.

Dan Wilson, president of Local 33 of United Steelworkers of America, said the union has heard more hiring will take place at Trentwood, but it was not known when that would happen.

Even if the new furnaces don't bring more union jobs, the expansion represents a positive step for the company's union workers, Wilson said.

"This is a good deal for Steelworkers," he said. "Any money invested tells us they plan on being in the aluminum business for a while. If they weren't investing, that would be a concern to us."

Kaiser spokesman Geoff Mordock said the company won't disclose whether more jobs will be created by the expansion.

The total $105 million the company plans to invest will be used to install three heat treat furnaces that will come on line over the next two years, the company said

The expansion is driven by increasing demand for high-quality heat treat plates used in the aerospace industry, primarily from commercial airplane makers Airbus and Boeing Co.

"This additional investment is supported by a strong customer order book that requires capacity beyond what is being provided by the $75 million expansion," President and CEO Jack Hockema said in a news release.

Hockema recently said the company, which opened the Trentwood rolling mill in 1940, intends to remain a strong part of Spokane's economy.

The shift toward aerospace production coincides with a resurgence in the airline industry. Trentwood has stopped producing aluminum for cans and cars and retooled for higher-quality airplane-grade aluminum.

Before aluminum prices rebounded, Kaiser management cut costs between 2001 and 2003 by reducing the work force at Trentwood to about 225, Wilson said. The company also sold its shuttered Mead smelter in 2004 for $7.4 million.

Mordock said one feature of the expansion is the technology needed to stretch aluminum plate wider than the plant has been able to in the past. Kaiser once employed 2,000 workers in the area, but that fell to fewer than 600 after the company filed for bankruptcy protection in February 2002.

Before the filing, Kaiser was hurt by a prolonged labor dispute that included what was ultimately ruled an illegal lockout of workers. The West Coast energy crunch several years ago also battered the company, as aluminum production requires large amounts of electricity.

China's Chalco to reduce alumina prices as rivals boost supply - report

Forbes - 08.02.2006, 09:13 PM

BEIJING (XFN-ASIA) - Aluminum Corp of China (Chalco), the world's second-largest producer of alumina, is expected to cut its alumina price sharply soon, after import prices tumbled on expectation of a surge in domestic supply, the South China Morning Post reported.

A Chalco spokesman said the price increases at local rivals had been faster than expected, the Hong Kong newspaper reported.

Competitors -- primarily funded by local government entities and private enterprises -- are boosting capacity by building new plants mainly in Henan, Shandong, Shanxi provinces and Chongqing city, the daily said.

Chalco, a former monopoly, could see its market share in domestic output fall from 92 pct last year to 47 pct by 2008, the newspaper cited a recent Goldman Sachs research report as saying.

In March last year, Beijing ordered a halt to nine alumina projects being built or in the planning stage in a move to prevent disorderly exploitation of mineral resources involving 3.2 mln tons of annual capacity.

andrew.pasek@xinhuafinance.com

Alcan: Hopes For Sohar Expansion Decision Within 2 Yrs

Dowjones Business News Wednesday August 2nd, 2006 / 18h07

LONDON -(Dow Jones)- Canada's Alcan Inc. (AL) said it hopes to take a decision on the phase two expansion of the planned Sohar aluminum smelter in Oman within the next two years.

"An expansion is likely to be economically attractive and in order to proceed, we'd need to have made arrangement for another block of power," Alcan President and Chief Executive Dick Evans said.

"It'll take a year or two to put together the power block for an expansion, and we have an obvious interest in accelerating this process if we can," he added.

Wednesday August 2nd, 2006 / 18h07

Century workers win health care battle

Charleston Daily Mail 02-Aug-2006

http://www.dailymail.com/news/News/2006080234/

UPDATE 2-Guinea president signs deal on Alcoa/Alcan refinery

Reuters Wed Aug 2, 2006 4:12pm ET

By Saliou Samb

CONAKRY, Aug 2 (Reuters) - Guinean President Lansana Conte has promulgated a legal convention allowing aluminium giants Alcoa (AA.N: Quote, Profile, Research) and Alcan (AL.TO: Quote, Profile, Research) to build a 1.5 million tonne-a-year alumina refinery, officials said on Wednesday.

Conte has been expected to sign the convention since June, after parliament approved the text in May, and the delay has held up a $20 million feasibility study, Cece Noramou, inspecteur-general at the mines ministry, told Reuters.

He gave no reason for the delay in signing the convention.

U.S. Alcoa and Canadian Alcan plan to build the refinery around 300 km (190 miles) from the West African country's capital Conakry at Kamsar, where the companies already have bauxite loading operations through a joint venture, CBG.

Compagnie des Bauxites de Guinee (CBG), the world's top bauxite exporter, is majority controlled by Alcoa and Alcan's joint venture Halco and currently produces 14 million tonnes of bauxite a year, 12 million tonnes of that for refining abroad.

"The decree has been signed, which enables us to mobilise the funds for our feasibility studies. It will only be after the studies are complete that we can determine exactly when work will begin," said a senior Alcoa company source who declined to be identified.

Parliament approved the convention despite some objections that it did not have the results of the feasibility study, amid concerns that any further delays to the project might lead Alcoa and Alcan to site the new refinery in nearby Ghana instead.

When the legal convention was passed by parliament in May, Alcoa said construction could start in early 2007, with the refinery going into production in 2009.

The plant will refine bauxite -- of which Guinea has one third of the world's known reserves -- into alumina which is then smelted into aluminium metal.

The refinery is projected to cost $1 billion -- less than half the price tag projected for a rival 2.8 million tonne-a-year alumina refinery planned by Canada's Global Alumina (GLAu.TO: Quote, Profile, Research) in the same region of Guinea, which company officials have said will come on stream in late 2008.

RusAl Explores for Bauxite

The Moscow Times, Russia Friday, August 4, 2006. Issue 3468. Page 6.

Russian Aluminum, which makes one-tenth of the world's aluminum, said Thursday that it had started exploring a large bauxite deposit in northern Russia that might feed a planned alumina expansion.

Russian Aluminum, or RusAl, the world's third-largest aluminum producer, said it would spend 200 million rubles ($7.5 million) exploring the Plesetsky area of the North Onega bauxite deposit by mid-2008. (Reuters)

Financial Post interview: Alcan CEO Richard Evans

National Post Canada - Thursday, August 03, 2006

"We're positioning ourselves as a value growth opportunity for our investors," not as a takeover target

Alcan Inc. reported record earnings this week and raised its dividend for the first time in 11 years. The world’s second-largest aluminum company also said it is weeks away from deciding whether to proceed with two smelter projects that will substantially boost its capacity and make it more cost-competitive. The two projects, along with another now underway and a fourth in the works, would cost US$4-billion to develop and boost Alcan’s smelting capacity by 29% by the end of the decade. On Thursday, chief executive Richard Evans spoke to Financial Post Montreal bureau chief Sean Silcoff at the company’s Montreal head office. Here is a partial transcript of the interview (a shorter version appears in Friday’s Financial Post)

Q: You have said you believe we are near the top of the market for metal prices. If that is the case, is now the right time to be spending US$4-billion on new capacity?

A: "There is a big difference between acquiring new assets at the top of the cycle, and developing your own opportunities, which are cost based. These projects take three to four years to get done. We have found we’re not very accurate nor is anyone else at forecasting what the price is going to be three to four years down the road, let alone next year. So our philosophy is don’t try to time the cycle on an organic growth project, because you can’t. And, rather, focus on the quality of the project. I think that’s where we may differ from some others, in that we feel we’ve got the highest quality pipeline. If you look at the four projects we listed (in Oman, as well as proposed smelter expansions in South Africa, Iceland and Kitimat, BC), they’re all first quartile" [which means they would be among the cheapest 25% smelters to operate in the world].

Q: What has yet to be done before a final decision is made on proceeding in British Columbia?

A: "It is a matter of finalizing negotiations with the B.C. government, then management making an assessment those final terms are satisfactory to go ahead. We have had discussions ongoing for months [with the government], so you can imagine we have made considerable progress. But it’s not done yet. Realistically I’m highly confident we will complete that in the third quarter."

Q: And in South Africa?

A: "We have been talking to the government and the power supplier there for 18 months, and we have now made substantial progress. Again, it’s not done, but I think within the next 60 days we will either reach an agreement or decide we’re not going to go ahead.

Q: Tell me about the significance of these two projects, how this positions Alcan and where it takes you strategically.

A: "Today we have almost 50% of our primary smelting capacity in the first quartile and none in the fourth quartile [the 25% highest-cost smelters]. So we have a very attractive set of smelting assets. By doing these additional projects, which will be first quartile projects, it would increase our lead and relative competitive advantage in the smelting area, and it would do so capitalizing on our world-leading technology. We’re significantly advantaged today because of our low-cost smelting position, we own our power to a much larger degree than anyone else, so we have control over our energy costs [the company owns more than 50% of its energy sources] where others are experiencing energy cost increases. The important point is it’s very, very difficult to replicate those advantages. Who is going to replicate a low-cost, historical cost-based hydro system with the world’s most advanced technology smelter attached to it? Who else can exercise that option? Nobody."

Q: We know hedge funds have been jumped in to influence M+A deals in the industry. What is your sense of how Alcan’s investor base is changing with regard to hedge funds?

A: "There has been very little impact. We have quite a small investment base of hedge funds, far less than 5%. I can only presume they don’t see short-term gains. They don’t see it is as a volatile situation where they can play the volatility. Obviously, if you look at Falconbridge, Inco, Xstrata, Phelps Dodge, all of that, you’ve got a great deal of uncertainty and volatility, and hedge funds love that. They jump in and they can start rumors, and sell on the rumors, and try to manipulate the market, and be in and out, and they thrive on volatility. In our case, apparently, they feel they couldn’t drive that kind of volatility or not see it as an area that is volatile enough that they would reap benefits. I think our stock moved 7.3% (on the TSX Thursday, after results were released). That was the biggest move we’ve had since 2003 in a single day. That is not highly volatile.

Q: How real is possibility global mining giants Rio Tinto PLC and BHP Billiton PLC will take a run at the aluminum industry? They are big, they have cash, and the top aluminum companies would be relatively small fry for them to buy.

A: "Well, you don’t see them getting into the steel industry, and the aluminum industry is bigger than the steel industry in market capitalization. The BHP and Rio people are obviously pretty smart. Their core business is really mining and minerals, not processing, even smelting. They’re marginally in smelting. But they very much have expertise on discovering ore bodies, developing them, and that is what they do. They could always move into aluminum, but it is a somewhat different business with a different profile. Their own aluminum businesses…have not been as good as their returns in other investments."

Q: Have either of them talked to you or the board about a takeover?

A: "Asking is not going to get you an answer."

Q: What’s your assessment of the M+A activity in the mining and metals sector?

A: "I think particularly in the copper, nickel and zinc side there is a lot of hot money. I think there is far less hot money in the aluminum sector, just by looking at our own shareholding base. It has continued to tend to be long-term investors."

Q: Some might argue this is because these other metal prices heated up earlier and rose higher. Aluminum has had a nice rise in the last year or so.

A: "Aluminum has increased considerably less than most of the other metals we’re talking about during this period. Today it’s US$2,500 [per tonne on the London Metals Exchange]. When we started this it was maybe US$1,400, US$1,500 three years ago. So that would be up 60 to 70%. Copper was about the same and it’s about US$7,000 now. It peaked at US$9,000.

Q: What do you see happening to the aluminum price?

A: "A big driver is China, which overbuilt their capacity over the last three or four years. They’re slowing down their rate of new building. Their exports of primary aluminum are dropping. This is what is what is holding the market up today, because people see that, they see the Shanghai stocks falling, they see a fairly firm position and they don’t see as much capacity being built in China as there was. Then on top of that you’ve got the fact much of the Chinese capacity is fourth quartile. So if there were to be any significant drop in aluminum, say to $2000 a tonne, a very big portion of the Chinese capacity shuts down. As the price falls, they’ll close capacity, as there would be in Europe, because the European cost curve has moved up dramatically. What is the equilibrium price? The last couple of months the market seems to have found US$2,500 (per tonne), and it seems to have stabilized there. At US$2,500, we will continue to be highly profitable."

Q: So it seems you do well either way. If the price stays high, the profits roll in, and if the price drops, you become...

A: "An acquirer."

Q: Given all the noise and mad money in the industry now, a company your size has to decide if it is prey or predator. How has the company decided to proceed?

A: "We’ve more than tripled in size in the last three years. We have been very much an acquirer. So if you say, "Are we trying to position the company for sale, or are we trying to grow the company," it’s clearly the latter. Having said that, we don’t go out and make overpriced acquisitions when we’re at this point in the cycle.. I will tell you [on the possible sale of Falconbridge aluminum assets by Xstrata should its takeover bid for the former succeed] we have not been contacted. If we were we would take a look, but we now the smelter is a mid-range, maybe third quartile cost smelter. And if their expectations are that they’ll get today’s premium in the market for it, then we would have no interest."

Q: So what would change the company’s position from acquirer to potential target?

A: "I’m having a hard time coming up with something that, in our view, would make us think we maximize our shareholder value over the long term by putting a "For Sale" sign up. Because we know our growth plans, we know our cost position, we know our technology. I think it could be said that the market has not yet fully realized all of that, so we could be undervalued in that sense, and perhaps are. We’ve always sold at a discount to [market leader] Alcoa, as much as 20%. The gap is narrowing considerably. And I think that change is taking place where in the future we will not necessarily be selling at a discount, for all the right reasons that people are better beginning to understand" following the successful integration of Alcan’s acquisition of French aluminum company Pechiney.

Q: It sounds like you’re saying pretty clearly the company is not for sale.

A: "We’ve got a great pipeline ahead of us, we have got the world’s leading technology, we know how to deploy it, we’ve got a very strong management team through the ranks, a lot of options to create value for our shareholders. [We’re] not for sale."

Q: Some in the investment community, however, feel your news and comments Wednesday are meant to position Alcan as an attractive takeout target. You have all this low-cost capacity you’re thinking of adding, record earnings, a strong demand outlook, first dividend increase in 11 years, and even talk of a possible share buy back. How do you respond to that speculation?

A: "I would say you’re misreading it. We’re positioning ourselves as a value growth opportunity for our investors and the cash flow we have ahead of us allows us to do both a dividend increase and execute on very attractive projects."

Q: Have you been pitched by investment bankers to do some kind of deal?

A: "All the time. During the rumors [of a possible bid for Alcan], before the rumors, after the rumors. That’s what they do, right? They’re real estate agents. They basically go around and either try to sell you something, which a lot of them are doing, or come around and try to convince you to sell something."

Q: There is talk in the market you were looking at joining the proposed three-way deal between Inco, Falconbridge and Phelps Dodge earlier this year. Is that true?

A: "We would not enter into something like that unless we thought it had good economics. We wouldn’t get in the game. Did we do our own back-of-the-envelope and make an assessment? Yes. But did we choose to get in and play the game? No, [because] we feel it’s near the top of the cycle for those metals, and secondly, as we looked at the situation, we thought it was an unstable situation, and there would be other players entering the game."

© Financial Post

Alcoa launches ops at Alumar expansion - Brazil

BNamericas, Chile - Aug 4, 2006

US aluminum producer Alcoa (NYSE: AA) has officially opened the line three expansion at its Alumar aluminum smelter in Brazil's Maranhão state, the company said in a statement.

The line three project required total investment of US$185mn and expanded output capacity to 440,000t/y from 377,000t/y of aluminum ingots by adding 100 pots. The facility now operates a total of 710 pots.

In addition, Alcoa has upped its stake in the Alumar plant to 60%, providing the company with roughly 264,000t/y of aluminum from the Brazilian operation. Anglo-Australian resource group BHP Billiton (NYSE: BHP) owns the remaining 40%.

Alumar is in the city of São Luis.

Pittsburgh-based Alcoa has primary aluminum, fabricated aluminum and packaging operations in Brazil plus a bauxite mine in Jamaica. In Latin America, the company is also active in Argentina, Colombia, Peru, Uruguay and Venezuela.

BNamericas.com

Alcan commits AU$600,000 to CDU for environmental research program

Charles Darwin University, Australia - Aug 3, 2006

Nhulunbuy, Australia – August 4, 2006 – Charles Darwin University (CDU) has welcomed Alcan’s announcement today committing AU$600,000 to its ‘Tropical Futures: Mineral Program’ (Program). The Program’s objective is to further minimise the environmental impact of mining and mineral processing activities in northern Australia including the Northern Territory.

CDU Vice-Chancellor, Professor Helen Garnett said Alcan’s commitment to ‘Tropical Futures’ is an important step in the right direction.

"On behalf of CDU, I would like to thank Alcan for its commitment to the Program and contribution to the whole mining community," Professor Garnett said.

"At CDU, we are committed to transforming the way we utilise our land, water, mineral and energy resources through a better understanding of environmental systems and the use of new technologies," continued Professor Garnett. "Alcan is playing a critical role in this regard and, with this additional support from the mining industry, we will be able to further enhance sustainability within the resources sector."

President of Pacific Operations for Alcan Bauxite and Alumina, Kurt Thurnherr said: "Alcan knows that building a successful company, and therefore a sustainable legacy, is directly linked to the economic, social and environmental contribution it makes to its operating communities.

"This is why Alcan is proud to be the first signatory to the ‘Tropical Future’ program—a research initiative that is supported by the Northern Territory Government. Alcan’s partnership with CDU is part of its ongoing commitment to doing things the right way," Thurnherr continued.

"This partnership will assist in delivering long-term environmental benefits to the community," said David Buick, Site Manager, Alcan Gove. "As part of the Program, Alcan will fund a senior research fellow for three years and support other projects in line with the Program’s objective. In addition, CDU will build on existing research work that it has undertaken with Alcan’s Gove alumina refinery located in Nhulunbuy," he added.

CDU is currently providing specialist research and monitoring support for Alcan’s Gove refinery including the Melville Bay Marine Health Monitoring Program (MHMP), which will continue as part of the Program.

Charles Darwin University is founded on 50 years of delivering tertiary education to the Northern Territory. Formed in 2003 through a merger between the Northern Territory University, Alice Springs-based Centralian College and the Menzies School of Health Research, Charles Darwin University offers a fresh approach to training, education, research and knowledge application. It aspires to be recognised internationally as a centre of excellence in Indigenous and cross cultural knowledge, tropical knowledge (relevant to the wet/dry tropics) and desert knowledge.

Alcan has been part of Australia’s aluminium industry since 1967 and its Australian operations play a critical role in the company’s international portfolio. Australia is now Alcan’s major capital base outside of Canada, contributing 60 percent of Alcan’s global alumina production and employing more than 3,500 people around the country. These interests include the Gove alumina refinery in the Northern Territory (100 percent ownership), Queensland Alumina Limited (41.4 percent), the Tomago aluminium smelter in New South Wales (51.5 percent) and bauxite reserves in the Northern Territory and North Queensland.

CDU Media Contacts:

David Parry

Phone: +61-8-8946 6701

Email: david.parry@cdu.edu.au

Christine Bond

Phone: +61-8-8946 6019

Email: christine.bond@cdu.edu.au

Bonneville Power moving ahead with plan to dividing up system

The Columbian, WA Aug 6, 7:40 PM EDT

KENNEWICK, Wash. (AP) -- The Bonneville Power Administration is pressing forward with its plan to divide up the federal Columbia River Power System in hopes of approving it in January.

If public and private electric utilities, environmental interests, aluminum companies and other interested parties don't reach agreement on key details, BPA is pledging to do it for them in time to ship a final plan to Washington, D.C., early next year.

The agency is gathering public comment through the end of September and will hold the second of five regional public hearings on Monday at the Franklin Public Utility District in Pasco.

BPA wants a plan in place soon, in part, so utilities and other entities can begin making decisions about future power supplies.

"Nothing in the energy business can be done overnight," Scott Simms, a spokesman for Portland, Ore.-based BPA, told the Tri-City Herald in Kennewick, Wash. "It's imperative we have those discussions now."

Historically, BPA has provided all or most of the power needs for its public utility customers, even if it meant acquiring extra supplies when demand topped what its system of federal dams and lone nuclear plant could generate.

But after a botched power project deal near Tacoma in the mid-1990s cost Bonneville millions, utilities began pressing the agency to get out of the business of acquiring power.

BPA started getting serious about it after new power sales contracts were signed with utilities in 2001, and it set out to define its future role in helping the Northwest meet growing energy needs.

As many utilities have sought, BPA's proposal leaves it with virtually no role. The agency would sell 7,100 megawatts of electricity generated by the Columbia River Power System to its 130 preference customers - public utilities and rural electric co-ops - giving each a legally defined sliver of the system's output.

BPA would acquire no more than 300 megawatts more so that all preference utilities would have all the power they need when contracts take effect in 2011. But as those utilities grow, they would be responsible for acquiring new power supplies on their own.

BPA would offer to do that for them at a higher rate but, unlike in past years, the costs and risks of doing so would not be shared by all 130 preference utilities. This is what many Bonneville utility customers have wanted: freedom to make their own choices about their future power supplies.

There are tough decisions to be made about what benefits to provide residential and small farm customers of private utilities and aluminum companies and how much to spend promoting conservation and environmentally friendly power plants.

Environmentalists worry utilities acquiring new power supplies wouldn't buy as much green power as BPA might. And there's some concern that small utilities, no longer able to share risks in such a large pool of other Bonneville customers, could suffer.

Another issue is the Bush administration's plan to require Bonneville to use some of the money it gets from surplus power sales to pay down its debt to the U.S. Treasury. That's money that is now used to offset other BPA costs to hold down electric rates.

There's also debate about whether dividing up the Columbia River Power System will help the Northwest defend it from congressional powers that would prefer its benefits to be spread across the country in one thin sheet.

Unity has been the Northwest's greatest weapon. But divisions were created in the public power community when BPA, at the request of some large public utilities, diversified its contract offerings in 2001.

That ultimately pit one set of utilities against another. Now it appears Bonneville will offer an even greater mix of contract offerings, which could create yet more divisions.

Any changes would not take effect until 2011, but they would be lasting. Bonneville is planning to incorporate them in new 20-year contracts with its utility customers.

"This stuff is going to have long-term implications," said Marc Krasnowsky, a spokesman for the Northwest Energy Coalition. "It really does set up a whole new template for meeting energy needs. People should be paying attention."

On the Net: BPA: http://www.bpa.gov/corporate/

Information from: Tri-City Herald, http://www.tri-cityherald.com

© 2006 The Associated Press

Comalco port gets $78m upgrade

Monday, 07/08/2006

The mining boom has seen record demand for aluminium, leading to record production of bauxite at Comalco's Weipa mine on Cape York.

After producing 16 million tonnes last year, the company is on track to set a new record. To cope with growing demand, the company has spent $78 million upgrading its port.

The main part of the upgrade is the installation of a second ship loader, which weighs 650 tonnes.

Weipa manager Rob Atkinson says it can fill giant ore ships in no time at all.

"The ship loader is basically a device which allows the bauxite from the stockpiles to be directly loaded into a ship and then it allows the bauxite to be fed into the ship at a rate of about 6,500 tonnes an hour," he said.

"So when you think that we have ships anywhere up to 70,000 tonnes, it means it can load in approximately 10 to 11 hours."

RUSAL Pockets Guyana’s Mines

Kommersant, Russia Aug. 8, 2006

The South American country of Guyana and RUSAL have struck a deal to privatize bauxite mines in Berbice owned by the state-controlled Aroaima Mining Company (AMC). The contract will provide RUSAL with the source of raw materials for the Nikolaevsky Aluminous Plant in Ukraine. After acquiring Guyana’s mines the Russians will probably lose interest in Venezuelan bauxite mines the operation of which it has been negotiating with the local authorities for two years.

AMC said that it sold its mines for $22 million to Bauxite Company of Guyana Inc., RUSAL’s subsidiary with 10-percent stake belonging to Guyana’s government. Bauxite Company is set to boost the extraction of bauxites by 80 percent to 2.5 million metric tons a year, the company’s general manager Alexey Gordimov told Stabroek News agency. The country’s prime minister Samuel Hinds hopes that RUSAL will make the industry lucrative. The Russian aluminum giant is expected to put some $20 million into the project.

A part of the bauxites will be shipped from Guyana to the Nikolaevsky Aluminous Plant, while the remaining part will go to consumers in the Caribbean, Mediterranean and Black Sea regions. 350,000 metric tons of bauxites are expected to be delivered at the Ukrainian smelter in 2006. The supply will go up to 1 million tons in 2008.

RUSAL also signed a ten-year contract with Oldendorf Carriers, a German shipping company, to transport the cargo. The Russians will pay some $8 or $10 for every metric ton of bauxites to be taken from the northern part of the South America to ports in the Black Sea, according to Alexey Bezborodov, the director of projects of SeaNews.

The agreement with the government of Guyana is the first successful project of RUSAL in South America. The Russian company has been in the talks with Venezuela’s authorities on the bauxites mining since 2003 but the parties have not come to terms yet. The deal with Guyana may decrease RUSAL’s interest in bauxite mines in Venezuela.

Russian Aluminum Opens Itself to Banks

Kommersant, Russia Aug. 8, 2006

// And will tell everyone else who owns it soon

Corporate Management

Rusal, considered one of the most secretive of the Russian metal companies, will disclose the names of its owners within the next six months, and convert to consolidated accounting under international standards and will introduce three independent representatives on the board of directors within a year and a half. It's all the price of an agreement with the International Financial Corp. and European Bank for Reconstruction and Development to allot $150 million to Komi Aluminum, a joint enterprise of Rusal and SUAL. Kommersant has obtained information that, in the documents presented by Rusal, only one owner is named – Oleg Deripaska.

IFC representative Christopher Goss told Kommersant that that the boards of directors of the banks made the decision to provide the $150-million credit to the aluminum company on January 10. The details will be worked out at a multilateral meeting between Rusal, SUAL, which have parity shares in the aluminum plant, and the two banks. It is known only that the banks will both provide $75 million for ten years. Those funds will be used to expand bauxite production at the Sredne-Timanskoe deposit from 1.6 million metric tons to 6 million tons by 2008 and to prepare for the construction of an alumina plant with a capacity of 1.4 million tons.

The banks first expressed their willingness to credit the project in August 2004, when SUAL was the sole owner of Komi Aluminum. The banks reacted cautiously when Russian Aluminum became involved in the project in April 2005, intentionally drawing out the decision process. Finally, they demanded more information about the ownership structure of Rusal and Basic Element, which is officially the owner of all Rusal stock. Analysts estimate that Rusal is worth $10-12 billion. In additional to the requirements the banks placed on Rusal, they are demanding that Basic Element adopt a code of corporate ethics and disclose information about its investments. No requirements were made of SUAL, which has had a relationship with the EBRD for four years already. The real motivation for Rusal's cooperation with the banks may be to preserve its relationship with SUAL. Kommersant has information that Rusal proposed buying the aluminum business from SUAL owner Viktor Vekselberg. They failed to agree on a price but may still discuss the sale of SUAL's share in Komi Aluminum.

Russian Aluminum Won't Help Aluminum of Kazakhstan

Kommersant, Russia Aug. 8, 2006

Russian Aluminum Won't Help Aluminum of Kazakhstan

The joint Russian Aluminum-Eurasian Financial and Industrial Co. project to construct a bauxite and aluminum complex in Kazakhstan will not be implemented. Neither company is providing an official explanation, but unofficial sources say that the companies were unable to come to the necessary agreements. Russian Aluminum needed a bauxite plant, while Alexander Mashkevich, owner of the Eurasian Financial and Industrial Co. and Aluminum of Kazakhstan has promised the Kazakh government an aluminum plant. Russian Aluminum and Eurasian Financial and Industrial Co. signed a memorandum on the joint construction of a bauxite and alu8minum complex last spring. The project was to be worth $3 billion and consist of a bauxite plant with a capacity of 1.5 million metric tons per year and an aluminum plant with a capacity of 500,000 tons per year. The plants were to be built simultaneously with a start at the beginning of 2006 with an operator owned jointly by the two sides.

Mashkevich won a tender for 31.7 percent of Aluminum of Kazakhstan through the Swiss-register Corica company. That stock, combined with his previous holdings gave him a controlling package. One of the conditions of the tender, however, was the construction of an additional plant to bring the country's total aluminum capacity up to 1 million tons per year. Russian Aluminum, which produces 75 percent of its raw materials, was interested in the bauxite facility. When the difference in interests led to the dissolution of the partnership, Russian Aluminum began to concentrate on its own projects to produce bauxite in Guinea and Guyana and expand production at its Achinsk and Nikolaevsk plants. The purchase by Russian Aluminum of a production license for the Severo-Onezhskoe bauxite deposit undoubtedly also contributed to the reconsideration of the partnership with Mashkevich. Russian Aluminum plans to build facilities there with a capacity of 1.4 million tons per year. Also, Russian Aluminum signed an agreement with SUAL, another Russian aluminum company, for the joint construction of a bauxite plant with a capacity of 1.4 million tons for $1.2 billion.

Russian Aluminum states that Kazakhstan is still a priority location for it. "We have not given up our plans and are looking at other options for implementing [bauxite and aluminum] projects in that country. In particular, we are negotiating with the Kazakh government and are preparing proposals for participation in the economy of that country," the company's press service stated.

Novelis Inc. joins EPA Climate Leaders program

Waste News, OH Aug. 9 2006

Novelis Inc. has joined a U.S. voluntary effort to curb its greenhouse gas emissions, the company said Aug. 9.

The aluminum company´s North American operations will participate in the U.S. Environmental Protection Agency´s Climate Leaders program. The industry-government partnership helps companies develop comprehensive long-term climate change strategies. Novelis will set a greenhouse reduction goal and measure its emissions to check its progress.

Novelis operates rolled aluminum production facilities in 11 countries. The company supplies aluminum sheet and foil to several industries, including the automotive and transportation, beverage and food packaging, industrial and construction and printing.

Kitimat Works decision only weeks away.

Northern Sentinel, Canada Aug 09 2006

By Ryan Calvery

Alcan will be making the decision to modernize the smelter within the next seven weeks, says company spokesperson Alexander Christen.

"It still needs some work with the government and then management would have to look at it as well, so it’s still very much a work in progress," he told the Sentinel.

"But we’re very confident that we’ll reach it by the (end of September)."

The modernized smelter would produce 400,000 tonnes of aluminum a year, using state-of-the-art Pechiney technology.

Currently the plant capacity is 272,000 tonnes - it is producing about 250,000 tonnes.

The total cost of the modernization is expected to be around US$2 billion.

"The concept of the smelter is there, we’re just finalizing the details," Christen explained.

But CAW 2301 union president Rick Belmont questions why the company can’t build the modernized plant but keep some of the old lines operating as well.

"There’s no reason why they can’t keep as much of the old lines as the power will support," Belmont said. "It could mean the difference between 150 to 200 jobs."

He also estimated that the integration of old and new potlines could add at least another 100,000 tonnes of aluminum production to the 400,000 tonnes the modernized plant would make.

But Christen countered that amount of power is just not available.

"We’re not able to get more power out of our energy facilities to be able to create more than that at the moment. So that’s why we have to keep it at that 400,000 tonnes capacity," he said.

Belmont disagrees with Christen on the quantity of power Alcan can safely rely on the Kemano generator to produce - what’s called ‘firm power’.

"They are way out to lunch on the firm power," Belmont said. "There’s more power there than meets the eye."

Despite this disagreement, Belmont said he believes plant modernization is a positive step. But his message to Alcan executives was, "watch the impact to jobs."

As for the timeline of when construction would begin if approval is given, Christen said this is one of the final details that still needs to be pinned down.

"Once the decision is made, construction would come pretty quickly though," he added.

Another variable that has yet to be determined is the issue of power sales.

Although Christen said the sale of electricity produced from Kemano would continue, the actual amount of energy sold is still an unknown.

The court date, in which the city is seeking an interpretation of the 1950 water rights agreement between the province and Alcan, is set for October 10.

Although the final decision to modernized the Kitimat smelter has not yet been made, Christen placed it in the top two of company priorities.

And he added he does not see any drawbacks to the project go-ahead.

"Obviously, there would be a cost in replacing existing technology with new technology," Christen explained.

"But our return on investment would be considerable, considering we are boosting capacity."

The new technology would also reduce greenhouse gas emissions, he added.

© Copyright 2006 Kitimat Sentinel

SUAL Group and Corporacion Venezolana de Guayana sign Letter of intent

Webbolt Business News, Canada August 09, 2006, 20:38

By CJ - Webbolt Newsroom

SUAL Group and Corporación Venezolana de Guayana (CVG) signed a Letter of Intent calling for the preparation of a feasibility study on the development of an integrated aluminium complex (from extracting raw materials to manufacturing finished goods) in the Bolivarian Republic of Venezuela.

The Letter of Intent was signed within the framework of a visit to the Russian Federation of the Venezuelan delegation led by the Republic's President Hugo Chavez. The document was signed by SUAL Holding Senior Vice President A. Volynets and Deputy Minister for investment promotion of the Venezuelan Ministry of Basic Industries and Mining V. Vasquez.

The Letter calls for a range of areas to be covered in the feasibility study including geological exploration, extraction, transportation and processing of bauxite, alumina refining, primary aluminium production and the manufacture of high value-added aluminium products.

The parties will share the expenses incurred in the process of carrying out the works defined in the Letter.

SUAL Group and CVG will also establish a joint technical commission, which will include two representatives from each side.

The signing of the Letter of Intent does not imply the establishment of a joint venture at the initial stage of cooperation. If the evaluation based on the results of the feasibility study for the integrated aluminium complex proves to be favourable, the parties plan to sign a related agreement on project implementation and initiate appropriate legal and administrative procedures.

© Copyright 2006 - Webbolt Company Limited All rights reserved.

SUAL, Russian nuclear agency ink cooperation memo

RIA Novosti, Russia 20:44 | 09/ 08/ 2006

MOSCOW, August 9 (RIA Novosti) - SUAL and the Federal Agency for Nuclear Power have signed a memorandum of cooperation in building aluminum production and energy generating facilities, the Russian aluminum producer said Wednesday.

The agreement follows a similar memorandum signed by the nuclear agency and another Russian aluminum giant, Rusal, earlier in the day.

The memo signed with SUAL focuses on joint long-term investment projects.

Under the document, SUAL and the agency-controlled Research Institute for Nuclear Power Plant Operation (VNIIAES) will set up a headquarters for talks on implementing joint projects, determining construction sites, developing mechanisms for cooperation and setting the terms of project contracts.

One of the world's top 10 aluminum companies, SUAL has enterprises in nine Russian regions and in Ukraine, and annually mines over 5.4 million metric tons of bauxite, some 2.3 mln metric tons of alumina, over 1 mln tons of primary aluminum, and about 60,000 metric tons of silicon. It also manufactures aluminum products, including foil, wire, and wheel rims, and exports 80% of its production.

Peeping into the pipelines

Mineweb, South Africa '09-AUG-06 14:35' GMT © Mineweb 1997-2006

By: Gareth Tredway

Alumina

Alumina production is currently growing sharply, and is expected to move into oversupply this year.

In its mineral form, bauxite, aluminium is the most abundant metal in the earth's crust. Mined bauxite is refined into alumina which is smelted into aluminium Alumina output in 2005 was 66.589 million tons. This is expected to reach 71.63 million tons in 2006, leading to a surplus of some 265,000 tons, according to an analysis by CVRD.

CVRD further forecasts an additional 22 per cent increase in production across the next three years, to 87.24 million tons. However, simultaneous demand growth is expected to keep the surplus at around 1 million tons over the next four years (???per annum).

Over two thirds of Aluminium’s use is in the transport, packaging and construction industry.

In this base metal, Billiton has big expansion plans for afoot, with capacity increases moving ahead at two of the refineries it is involved in, Worsley Alumina n Australia and a refinery in Brazil. Worsley will increase production by 250,000tpa to 3.5 million tons, while the Brazil expansion will boost capacity to 3.5 million tons from the current 1.5 million tons.

Full article can be viewed at http://www.mineweb.net/mining_finance/918169.htm

Alcan tips 'China syndrome' to roll on

Daily Telegraph, Australia August 11, 2006 12:00

By Tony Grant-Taylor

ALCAN chief executive Dick Evans agrees with BHP BIlliton and Rio Tinto that the China-inspired resources boom will be "stronger and longer" than those of the past.

"We don't see any major crisis, like a bank meltdown or political upheaval derailing the Chinese growth engine," he said yesterday.

He said Chinese growth was assured for five to 10 years, "though not perhaps without fluctuations".

But having been in the aluminium industry for nearly 40 years - and witness to "five boom cycles" -- the man who runs the world's second biggest aluminium company does not expect the good times roll on forever. Nor does he expect prices being paid in the current takeover mania to continue.

Alcan has some $5 billion in assets in Australia and is completing a major expansion of its alumina operation at Gove in the Northern Territory. It hopes to eventually cut costs by swapping the operation to gas from Papua New Guinea.

Alcan didn't make a bid for the former Pechiney bauxite leases on Cape York that were appropriated by the State Government which is negotiating a transfer to China's Chalco.

"We have moved on," says Mr Evans, who has the luxury of having nearby Cape York bauxite as well cheaper options globally.

RUSAL begins bauxite exploration in North Onega Region

Webbolt Business News, Canada August 10, 2006, 15:17

By MM - Webbolt Newsroom

RUSAL, the world's third largest aluminium producer, has announced the start-up of exploration works at the Plesetsky area of the North Onega Bauxite Deposit. The explored bauxite resources will be registered in the State Reserves Committee. The expected volume of bauxite reserves amounts to 250-300 million tones. The exploration works now underway involve drilling 147 boreholes and the evaluation of bauxites and accompanying components in the samples. The exploratory works, estimated at US$7 million, are expected to be completed by mid-2008. Based on the exploration results, a feasibility study for the construction of a bauxite mining facility will be prepared. The construction of the facility will be started no later than 2011. RUSAL will conduct an evaluation of explored bauxite reserves and a baseline environmental assessment of the Ixinsky Deposit. To support this RUSAL has also announced a tender for the design study and development of the deposit. In addition, an expert cost-estimation will be prepared for the construction of related mine and traffic routes. In 2004 RUSAL won a tender for the development of the Ixinsky area (except for the so-called Belovezhskaya pocket) and the exploration and development of the Plesetsky area of the North Onega Bauxite Deposit. The deposits are viewed by RUSAL as a potential platform for the construction of new alumina refineries. This project is a part of RUSAL's strategy to aim full self-sufficiency in raw materials by 2013.

About RUSAL: RUSAL is the world's third largest primary aluminium producer, providing primary aluminium and value-added casthouse products to customers in 50 countries.

© Copyright 2006 - Webbolt Company Limited All rights reserved.

Kaiser Aluminum to Supply Fighter Parts

MSN Money (All Associated Press News) August 11, 2006 12:59 PM ET

FOOTHILL RANCH, Calif. (AP) - Kaiser Aluminum, which makes aluminum products for aerospace, automotive and other industries, said Friday that it will supply Lockheed Martin Corp. and its partner companies with fabricated aluminum plate products for a fighter plane.

Financial details for the deal were not disclosed.

Under the terms of the contract, which starts in 2009 and runs through 2016, Kaiser Aluminum and metal supplier Transtar Metals will provide defense contractor Lockheed Martin and its partners Northrop Grumman Corp. and BAE Systems with products for the Department of Defense's F-35 Joint Strike Fighter, the Lightning II.

The Lightning II is a single-seat, single-engine military supersonic stealth aircraft expected to make its first flight this year.

Shares of Kaiser Aluminum fell 59 cents to $40.10 in afternoon trading on the Nasdaq.

Alcoa plant continues to grow

Warrick Publishing, IN 11-Aug-2006

By Nathan Blackford

Alcoa will add a new rotary furnace at its Warrick Operations plant that is intended to make the plant more efficient. The $7.2 million project, with an additional $2.5 million for pollution controls, will add approximately eight jobs and reduce the company's need to ship waste material to another facility in Kentucky.

"This is a very exciting project for our plant," said Ann Whitty, Vice President and General Manager of Alcoa Warrick Operations. "The size of this investment isn't as significant of some other recent projects, but it is still a very important project for our plant. It will create significant cost savings for us, as well as added employment."

The rotary furnace will allow Warrick Operations to process more of a waste material called dross without shipping it to another plant. Dross is created during the aluminum smelting process.

For now, the dross is being shipped to a facility in Kentucky, which processes the material and can recover usable aluminum from it. The usable material is then shipped back to Alcoa Warrick Operations.

"The rotary furnace will allow us to keep the dross within Warrick Operations," said Whitty. "It will save energy and costs for the plant. And it will also allow us to process some of the coated scrap that we generate that we also now have to send to a secondary processor."

Last week, the Warrick County Council voted to grant Alcoa a nine-year tax abatement on the new rotary furnace. Alcoa has sought and received similar abatements in recent months for other new equipment.

According to John Martin, Warrick Operations Ingot Manager, the new rotary furnace could also increase the percentage of recoverable aluminum taken from the dross. The new furnace could go online sometime in the third quarter of 2007.

"We get about 52 percent recovery when we send (the dross) out, and we are hoping that we will get much higher recovery in-house," said Martin. "Right now we are estimating, because we really don't know, that we could get a six to eight percent improvement in the recovery. That is a big cost-savings for us."

Martin said Alcoa sends approximately five million pounds of dross each month to the processor in Kentucky, though that number can vary widely.

Whitty said that the addition of the rotary furnace is part of recent growth at Warrick Operations. The company announced in July 2005 that it would invest approximately $330 million in improvements to its power plant intended to significantly reduce air pollution, increase power efficiency and lower costs. The first of the new scrubbers will go online in 2008.

Alcoa also announced earlier this year the relocation of a lithographic line from another Alcoa facility to Warrick Operations. That line should go into operation in the summer of 2007, with production ramping up through 2008.

Alcoa Warrick Operations has also hired more than 100 production workers already in 2006.

"The biggest sign of (the plant's growth) is the investment in the power plant," said Whitty. "To spend almost $400 million at a 50-year-old plant to keep it viable for the next 40 to 50 years is a wonderful sign that we do have great belief in this plant and its employees."

Swiss firm eyes China aluminum deal

Shanghai Daily, China - 2006-08-12

Fu Chenghao

GLENCORE International AG, a Switzerland-based commodities trader, plans to buy a stake in China's second-biggest aluminum maker by output, a source close to the deal told Shanghai Daily.

Glencore has entered into a memorandum of understanding with state-owned Qingtongxia Aluminum Group Co for the acquisition, the Swiss company's first aluminum investment in China.

The size and price of the stake will be decided after due diligence is completed. The deal can be finalized either by purchasing existing shares or for Qingtongxia to issue new shares via a private placement, the source said.

"On one hand, the company buys into a Chinese aluminum producer to secure resources as global demand rises," Pan Shifei, an analyst at Northeast Securities Co in Shanghai, said after being informed of the possible deal. "On the other, capacity in Europe is declining because of higher energy costs and environmental concerns."

Qingtongxia was founded in 1964 in the northwestern Ningxia Hui Autonomous Region. It operates hydro and coal-fired power stations. The firm is ranked second in China's aluminum business after Beijing-based industry leader Aluminum Corp of China.

Qingtongxia earlier set up an aluminum joint venture with Montreal-based Alcan Inc, the world's second-largest aluminum producer, in Ningxia autonomous region.

Ghanaians Surprise At VALCO Energy Subsidy

Gye Nyame Concord, Ghana Business News of Friday, 11 August 2006

Ghanaians have expressed shock and surprise at the news that they are subsidising VALCO’s electricity consumption to the tune of about ¢1.41 trillion as published by the Ghana Palaver of Tuesday, August 8. In an interview with a section of the public, some expressed surprise that the ECG could break the laws of the land by secretly increasing its tariffs, without passing through the laid-down process.

They were also surprised to find the Public Utility Regulatory Commission (PURC), exercising a "golden silence" on this issue, unless the Commission was itself part of the "conspiracy".

A Civil Servant who was also reacting to the story, wondered whether the illegal increases had been a regular practice in the past, the kind, which made parents jump on their little children and "disciplined" them for misusing electricity, in their (parents) absence

A worker of the ECG, who claimed he was not aware of the "secret deal" to extract illegal fees from the people to make up for the excess power consumed by VALCO, said his employers could have made the deal known to the consuming public, if their intentions were genuine and clear.

He called on the Government to come out with a statement on the issue, since it might have engineered the whole "secret taxation" to cushion the problems of VALCO.

Indeed, the Government had assured the nation of VALCO’s viability on the resumption of its operations and even given an indication of the company boosting the economy, in no time, instead of its being a liability. A Lawyer the Ghana Palaver spoke to recalled the "noise" made by Ministers like Nana Akufo Addo and Paa Kwesi Nduom, who saw Ghana, in no time, processing bauxite and producing aluminium, both for local consumption and export. If it is the case that Ghanaians are to bear part of the production costs, secretly, then the Ghanaian worker will even have to spend all his income on electricity bills, he said, adding "God save Ghana".

A Tema truck-driver said he would have to go and apologise to his wife for blaming her any time the electricity bills went up.

With the ECG, empowering itself to smuggle bills from one end to the other, "everything could go!" he added.

Owners of establishments, who are finding it difficult to cope with high electricity tariffs, could not understand why the government should be favouring some establishment over others, and called on the government to create a level playing field for all in the economy so they can all play their roles as Ghanaians and entrepreneurs to help build a viable economy for the people of Ghana.

New Smelter In the Works for Kitimat

Opinion250 News, Canada Sunday, August 13, 2006 06:29 PM

Energy Minister Richard Neufeld will announce in Kitimat tomorrow the construction of a new aluminum smelter for Kitimat.

The new smelter will have a capacity of 400,000 tonnes annually. The original plan announced in 2001 was for a 550,000 ton smelter and residents say the new smelter will operate with 700 fewer jobs. That cut is in addition to the 350 jobs that already have been cut.

When the new mill is constructed, Alcan will be able to free up about 140MW firm of electrical power and over 200 MW average if the Kenny Dam cold water release facility is constructed.

Critics say that means that while the city will receive a boost in employment while the smelter is being built, the long term impact is the loss of over 1000 jobs and their $50 million dollar payroll.

Earlier this year John Rustad MLA announced the province will contribute $120,000 to the Nechako Watershed Council for studies into the cold water release facility.

The provincial government has committed $50 million to the project while Alcan will contribute a further $50 million.

Alcan to invest $1.8B in its B.C. aluminum smelter

National Post, Canada Monday, August 14, 2006

Alcan Inc. will spend $1.8-billion to modernize its Kitimat aluminum smelter in northern British Columbia.

The investment would boost Kitimat's annual capacity by 60% to 400,000 tonnes a year.

"The modernization would increase Alcan’s annual global primary aluminum production by more than 4% and make Kitimat not only one of Alcan’s largest wholly owned smelters, but also one of the three largest in North America," Alcan said in a statement.

Montreal-based Alcan is the world’s second largest aluminum producer after U.S.-based rival Aloca Inc.

Modernizing Kitimat is just one of US$4-billion worth of projects Alcan has underway to boost its global output by 29% by the end of the decade.

Some of the new capacity at Kitimat will be ready by 2009, with the balance online by 2011. Modernization will extend Kitimat’s operating life by at least 35 years, the company said.

The project is subject to several conditions, including environmental approval by the government of British Columbia, project approval by Alcan’s board of directors, an electricity supply agreement with B.C. Hydro, and a labour agreement.

Financial Post

dhasselback@nationalpost.com

© Financial Post 2006

Alcan to cut about 550 jobs at B.C. smelter in billion-dollar expansion plan

Ottawa Citizen, Canada Monday, August 14, 2006

VANCOUVER (CP) - Alcan Inc. (TSX:AL) will cut roughly one-third of its workforce as part of a $1.8-billion-US revamp of its primary aluminum smelter in Kitimat, B.C., the company said Monday.

The number of people working at the plant will be reduced to roughly 1,000 from about 1,550 as part of the plan to modernize and increase production at the aging smelter from 245,000 tonnes a year to about 400,000 tonnes, Alcan said.

The company said it hopes to make the job cuts through attrition and retirements.

Cynthia Carroll, CEO of Alcan's primary metal group, told a news conference the aging smelter was becoming more and more costly to operate.

"Given the long-term desire that we have to be in British Columbia we had to make a decision to modernize and we're putting in the most advanced technology in the world that will provide a sustainable business case and business model for the future," Carroll said.

"Otherwise the facility would not have a long life going forward."

The modernization plan is expected to create 800 to 1,000 construction jobs, with the refurbished plant's first new capacity to come on stream in 2009 and final metal online by the end of 2011.

What was once the largest smelter in the world was in danger of becoming outdated if Alcan didn't go ahead with the upgrade and expansion, said B.C. Premier Gordon Campbell.

"That Alcan chose British Columbia once again sends a clear message that B.C. is a strong part of their future and Alcan is a strong part of the northwest's economy in British Columbia," he said.

Power for the operation will be drawn from Alcan's Kemano hydroelectric plant. The company's agreement-in-principle with B.C. Hydro contains a "smelter first provision" to ensure power is delivered to the plant, with surplus production being sold to the utility.

Alcan has faced criticism from Kitimat over selling electricity.

New Democrat MLA Robin Austin said the reason Alcan is allowed to use the power of the Nechako River so cheaply is to create jobs, not in order to profit by selling the electricity back to the people of B.C.

"We could have a lot more jobs if that power was being used for what it was originally intended and Alcan was putting in a smelter that used all of that power rather than selling 20 per cent of it back to B.C.," Austin said.

The District of Kitimat has claimed the aluminum maker's sale of power at the expense of aluminum production contravenes an agreement between the people of B.C. and the company.

The municipality argues Alcan was given rights to use the river at exceptional water rates in an effort to support its aluminum operations, not to export bulk power.

The district has taken the province to B.C. Supreme Court, claiming the ministerial orders allowing the power exports are illegal. The case is expected to be heard this fall.

Kitimat city manager Trafford Hall said he was disappointed at the size of the expansion, which he had hoped would offset some of the job losses due to technical improvements.

"It is a much smaller smelter than this resource will support," Hall said.

"The great concern we have is that now aluminum production will compete with power production and power sales."

The upgrade is subject to approval by Alcan's board, environmental permits and the conclusion of agreements with B.C. Hydro and the Canadian Auto Workers union.

On Monday, Alcan shares closed down 68 cents to $51.40 on the Toronto Stock Exchange.

© The Canadian Press 2006

Metallica Minerals Eyes Chinese Bauxite Market

Asia Corporate News Network (press release), Australia - Adelaide, Aug 15, 2006

(ACN Newswire) - Metallica Minerals Limited (ASX: MLM) associate, Cape Alumina Pty Ltd, has commenced ground preparations for a 580 hole drilling programme on its Cape York Peninsula bauxite project with the goal of outlining an initial resource of up to 100 million tonnes to potentially supply the surging Chinese alumina-aluminium market.

Drilling on the Wenlock bauxite deposit by Cape Alumina - owned 50% by Metallica and 50% by a private resource investment company, is the first exploration for more than 30 years on the tenement which is adjacent to mining leases owned by Alcan and Comalco.

Metallica Managing Director, Mr Andrew Gillies, said the drilling program will evaluate an area of 37 square kilometres of mapped bauxite on EPM14547 "Wenlock" and follows the formal granting of the tenement by the Queensland Government in April.

"As a junior resource company focused on bauxite, Cape Alumina is in the unique position of having a large tenement holding in one of the most prodigious bauxite production areas in the world," Mr Gillies said.

"The current drilling program is designed to generate the information to support an initial resource model and resource estimation statement, compliant to the JORC Code, for the Wenlock deposit, which we hope to finalise by December".

"The Wenlock deposit, which extends onto an adjoining tenement application held by Cape Alumina and covers a total area of 65 km2, is an extension of bauxite mineralisation on adjacent mining leases owned by Alcan and Comalco. Part of the Wenlock deposit was evaluated by CRA (now Rio Tinto) between 1970 and 1974 resulting in the delineation of extensive bauxite mineralisation with an average beneficiated grade of 53% Al2O3, 8% Reactive Silica and 7% Fe2O3.

"The average grade of the deposit appears to be similar to that of the Aurukun deposit south of Weipa, the subject of an international competitive bid process by the Queensland Government and now under a feasibility study by Aluminium Corporation of China Limited (CHALCO).

"The Wenlock bauxite appears to have similar grades to the Aurukun bauxite; however, unlike the Aurukun bauxite, early work conducted by CRA suggests that the Wenlock deposit might be preferred by alumina refineries due to its different mineralogy that could be treated at lower refinery temperatures."

Cape Alumina Chief Executive Officer, Dr Paul Messenger, said an in-house desk-top scoping study completed in February 2006 indicated that development of Cape Alumina's Wenlock deposit as a feed stock for Chinese alumina refineries could be viable based on current estimated global bauxite prices of US$25-$35/tonne FOB. In July, Cape Alumina abandoned its Kalumburu bauxite tenements in Western Australia following an internal review, in order to concentrate on its larger, better grade and more favourably located bauxite project in Cape York.

"Cape is continuing to investigate future marketing options for Wenlock bauxite, particularly in China. Chinese alumina refineries imported 2 million tonnes of bauxite in 2005 and this is expected to rise to over 5 million tonnes this year due to the rapid expansion of Chinese alumina refinery capacity coupled with limited domestic bauxite reserves," Dr Messenger said.

"Due to a combination of factors, including continued above average growth of the Chinese economy, the higher cost of treating Chinese domestic bauxite, and the low capital and operating costs of Chinese alumina refineries, we expect that future demand for FOB bauxite sales to China will continue to grow rapidly. Much of the world's bauxite resources are held by relatively few established alumina/aluminium companies, and a significant proportion of those resources are located in geopolitically unstable regions. There is therefore a growing trend amongst Chinese refineries to seek equity in foreign bauxite projects for long-term resource security."

The initial drilling programme for EPM14547 will comprise a total of 580 shallow aircore holes. Drilling will be conducted on a nominal 320 x 320 metre grid with an initial resource model and statement expected to be released by December. Cape Alumina is seeking to establish a bauxite resource at Wenlock of between 50 and 150 million tonnes and it is hoped that the initial drilling programme on EPM14547 will outline 50-100 million tonnes of this.

Alcan Inaugurate New Brisbane Headquarters

Azom.com August 14th, 2006

Alcan’s President and Chief Executive Officer, Richard B. Evans, and Queensland’s Premier, the Honourable Peter Beattie, today inaugurated the Company’s Australian headquarters in Brisbane. The inaugural event was attended by a cross-section of business and industry leaders, key government representatives and Alcan senior management, including Alcan Bauxite and Alumina’s Jacynthe Côté (President and Chief Executive Officer) and Kurt Thurnherr (President of Pacific Operations).

"At Alcan, forging strong partnerships is key to doing things the right way," said Richard Evans. "This inauguration recognizes the vital role that Queensland and Australia are increasingly playing in the Company’s international portfolio and business strategy. Alcan is proud of its forty year relationship with Australia, which today represents its largest capital base outside of Canada," he added.

Premier Peter Beattie congratulated Alcan on its contribution to the mining industry and the state’s economy. "I would like to acknowledge Alcan for its ongoing and substantial commitment to Queensland," Premier Beattie said. "Directly employing over 700 people in the state, Alcan is also securing further growth in the mineral resources industry," he added.

"From our Brisbane base, Alcan is focussed on growing its current business and seizing new opportunities in Australia and across the Asia Pacific region," said Jacynthe Côté.

"Alcan looks forward to its continued partnerships with governments, communities, industry, Traditional Owners and others to support economic, environmental and social development of Queensland and Australia," said Kurt Thurnherr.

The event also featured an art exhibition of Australian and Canadian art, titled ‘pARTnerships’, which was uniquely conceived for the inaugural event.

Alcan has been part of Australia’s aluminium industry since 1967 and its Australian operations play a critical role in the Company’s international portfolio. Australia is now Alcan’s major capital base outside of Canada, contributing 60 percent of Alcan’s global alumina production and employing more than 3,500 people around the country. These interests include the Gove alumina refinery in the Northern Territory (100 percent ownership), Queensland Alumina Limited (41.4 percent), the Tomago aluminium smelter in New South Wales (51.5 percent) and bauxite reserves in the Northern Territory and North Queensland.

Kaiser Expands Boeing Agreement

Houston Chronicle Aug. 16, 2006, 9:03AM

© 2006 The Associated Press

FOOTHILL RANCH, Calif. — Aluminum-products maker Kaiser Aluminum said Wednesday it signed a long-term contract with Boeing Co. to supply sheet and light-gauge aluminum plate for use in commercial aircraft products.

The contract extends an existing multiyear agreement to supply Boeing heavy-gauge plate metal.

Financial terms were not disclosed.

Kaiser said the contract was made possible by a $105 million expansion at its Trentwood Rolling Mill in Spokane, Wash.

Kaiser aluminum produces more than 500 million pounds of aluminum products including sheet, plate, extrusions, forgings, rod, bar and tube products. It has a staff of more than 2,000 at 11 plants in North America.

Kaiser shares rose 50 cents to $40 during morning trading on the Nasdaq.

Iran's aluminum import hits all-time 70% low

IranMania News, Iran Wednesday, August 16, 2006 ©2005 IranMania.com

LONDON, August 16 (IranMania) - Red tapes imposed by the banks on opening L/Cs and 70% reduction in aluminum import this year are the main causes of billet shortage in the country, Habbtollah Fazeli mentioned, MNA reported.

"Nevertheless, aluminum prices have not observed any fluctuation in the last 30 days due to the fall in construction business. It is still being sold at Rls.31,000 ($3.5) per kilogram in the market," the head of the Syndicate of Aluminum Cooperatives of Iran noted, adding many buyers had fortunately taken care of their needed aluminum in the first quarter of 2006.

Furthermore, within the same period, prices at London Metal Exchange (LME) took a jump and the major suppliers refused to import more aluminum as the domestic price, for the better or worse, kept low. "The 70% import reduction will eventually trigger some problems in the country’s supply and demand trend," he commented.

To make the matter more complicated, "closure of 50 crucibles at IRALCO due to the environmental problems has brought the production to a skimpy level and the Al-Mahdi Company exports a large portion of its products," Fazeli voiced his concern, calling on the government to increase national capacity by 50% as 65% of budgetary funds allocated to development plans.

Alcoa Foundation and Mercy Ships Partner In New Youth Health Center in Ghana

WeAreQC.com, IA Aug. 16, 2006-

TEMA, Ghana--(BUSINESS WIRE) -Alcoa Foundation announced today $68,000 funding for Mercy Ships creation of a new youth health and recreation center in Ashaiman, Ghana, a sub district of the Tema municipality in the Greater Accra Region of Ghana. Mercy Ships, a global charity, is the leader in using hospital ships to deliver free world-class health care and community development services to the forgotten poor.

Alcoa Foundation is working in partnership with Mercy Ships and Ghana Health Services, the Ghana government health agency, to establish the new center. Alcoa Foundation funding will support Mercy Ships, who will manage the construction of the center and equip the center, which will be staffed and managed by Ghana Health Services.

"We are thankful for Alcoa Foundation involvement in the development of this multi-purpose facility to create an enabling environment for youth, health and development within Ashaiman," said Dr. Glenn Strauss, vice president International Programs for Mercy Ships.

The new center will be constructed on land adjacent to an existing small clinic in Ashaiman, which has not expanded to meet the needs of the growing population and is limited in services. "The needs and services required by the youth of Ashaiman can't be met by the existing community health clinic," Strauss said.

The planned youth-friendly center will offer young people improved access to health facilities, raise health and hygiene awareness, provide family planning and consultation services, and a recreational unit. Construction is expected to be completed by the end of this year.

"This new center will address some of the critical needs of the youth in the community and create an environment where they are encouraged to access healthcare and support services relevant to their needs. It will be a welcoming place for them to meet and socialize in a safe environment," said Meg McDonald, President of Alcoa Foundation.

Alcoa's presence in Ghana is through Volta Aluminum Company (Valco), a joint venture with the government of Ghana, and the Alcoa-Ghana Bauxite and Alumina Project. Valco provides aluminum ingot from its smelter in Tema to Alcoa customers around the world.

About Alcoa Foundation

Established in 1952, Alcoa Foundation is a global resource that actively invests in improving the quality of life in the countries around the world where Alcoa operates. The Foundation's grants address global and local needs in Areas of Excellence that include: Conservation and Sustainability, Global Education and Workplace Skills, Business and Community Partnerships and Safe and Healthy Children and Families. Alcoa Foundation manages Alcoa's ACTION and Bravo! programs which recognize the volunteer efforts of employees with grants to the organizations they serve. For more information about Alcoa Foundation, visit www.alcoa.com, under Community.

Aluminum smelter protesters climb crane on-site

IcelandReview, Iceland 08/16/2006 | 15:08

Over a dozen protesters of the Reydarfjördur aluminum smelter in east Iceland entered the building site this morning, and two of those have climbed a 40-50-meter high building crane, on which they have attached a banner with slogans. Others have chained themselves to machinery. At the time of posting, actions were still ongoing. Police are on the scene and have arrested a few of the group. There are windy conditions in the area and the actions are thought to pose a safety risk, Morgunbladid online reports.

Most of the protesters involved are thought to be foreigners. A press release from a group that calls itself Saving Iceland states that the protesters are a group of environmentalists whose goal is to call attention to the threat that Iceland’s nature, cultural heritage and democracy are under as a result of Alcoa’s operations. Aluminum giant Alcoa is behind the smelter currently under construction.

According to Morgunbladid, two protesters were sitting by the side of the road this morning, watching their comrades up on the building crane, when a car pulled up and poured a two-liter bottle of coca-cola over them before driving away. Clashes between protesters and the general public have escalated in the area over the past few days. On Monday, protesters stormed an engineering firm in Reydarfjördur, closed all exits, and left only upon hearing that police were on their way.

RUSAL eyeing US$600-m Alpart/Windalco assets

Jamaica Observer, Jamaica Wednesday, August 16, 2006

Balford Henry, Business Observer writer

Negotiations for the partial or total acquisition of the US$600-million assets of Alpart and Windalco, by the aggressive Russian Aluminium company (RUSAL), one of the world's top three producers, are well advanced here, Business Observer sources said last night.

The deal being sought could see RUSAL purchasing the shares held by Swiss metal trading firm Glencore in the two plants and could be formalised by the fourth quarter of the current calendar year, the sources said.

But it was not immediately clear whether the transaction would involve sale of assets, a merger or a take-over of the plants' production.

A 35-member contingent of officials from the Russian company is currently in the island carrying out due diligence checks at both Alpart (Alumina Partners) in Nain, St Elizabeth and Windalco (the West Indies Alumina Company) in Manchester.

In 2001, Glencore bought Alcan's 93 per cent share in its previous joint venture with the Jamaican government known as the Jamaica Bauxite Mining Limited. Three years later, Glencore paid over US$300 million for Kaiser's 65 per cent interest in Alpart, the largest local alumina refinery. The Jamaican government retains a seven per cent ownership in Windalco.

The team from RUSAL spent all of yesterday at Alpart's Nain operation but remained tight-lipped about their mission.

But the bustle of activities aroused concern among the workers who have not yet been brought into the picture.

Spokesman for the workers, Norman DaCosta, National Workers Union (NWU) vice-president, said last night that the workers did not expect any fallout from any pact signed in light of RUSAL's aggressive worldwide expansion and its interest in Jamaica over the years.

"However, the union is seeking a meeting with the management to discuss the issue, as the workers were concerned about how a possible deal would affect their future with both companies," DaCosta said.

A government official who spoke on condition of anonymity said the government was not involved in the negotiations at this stage but would have to authorise any agreement reached under its regulatory function covering lands, industrial estates and taxes.

Glencore is a diversified natural resources group with worldwide activity in mining, smelting, refining, processing and marketing of metals and minerals, energy and agricultural products.

RUSAL, the world's third largest primary aluminium producer, provides primary aluminium and value-added casthouse products to customers in 50 countries, and accounts for 75 per cent of Russia's aluminium production and 10 per cent worldwide.

Russian oil billionaire, Roman Abramovich, regarded as the 11th richest man in the world, was among the former RUSAL shareholders until he sold his stakes and among other things, acquired the famous Chelsea football club in London in 2003.

Last year, it increased its revenues by 12.8 per cent to US$6.1 billion and tripled total investments worldwide.

Included among its recent acquisitions were Guyanese government mines controlled by Aroaima Mining Company (AMC) in Berbice for US$22 million.

This was RUSAL's first successful project in the region, since losing out to Glencore in the bidding for Kaiser's 65 per cent share in Alpart in 2004. RUSAL originally bid US$295 million for the stake and later upped it by US$21.2 million, when 35 per cent shareholder, Norsdk Hydro, joined the fray with a successful bid of US$316 million. It eventually sold its acquisition to Glencore.

Hydro said then that it decided to co-operate with Glencore, because the agreement allowed for improved operations and cost synergies through optimisation of bauxite reserves between Alpart and Windalco's Kirkvine and Ewarton plants which have a capacity of 1.25 million tonnes, roughly equivalent to Alpart's.

Rio Tinto to sell stake in Italian plant to RUSAL

Scotsman, United Kingdom Thu 17 Aug 2006

LONDON/MOSCOW (Reuters) - The world No. 3 aluminium producer, Russia's RUSAL will buy 56.2 percent of EurAllumina SpA alumina refinery in Sardinia, Italy, from the world's No. 2 miner Rio Tinto , the firms said on Thursday.

"The acquisition will bring us around 600,000 tonnes of additional alumina," RUSAL's spokeswoman Vera Kurochkina said. Alumina is an intermediate product for aluminium smelting.

Rio Tinto, which mines and refines materials used in products from steel to telephone wires, said the sale price was confidential but was not material as a percentage of its net assets.

"The transaction is conditional upon a pre-emption right of (European commodities trading firm) Glencore AG, the other shareholder in EurAllumina," RUSAL said in a statement.

RUSAL is owned by tycoon Oleg Deripaska, ranked Russia's sixth richest man with a fortune of $9 billion by Forbes magazine. RUSAL produces a 10th of the world's aluminium.

RUSAL plans to leapfrog Alcoa Inc and Alcan Inc by nearly doubling aluminium output to 5 million tonnes a year by 2013 from 2.76 million in 2005.

It plans to raise output of alumina, roughly two tonnes of which are required to make one tonne of aluminium, to 8 million tonnes from 3.95 million last year.

EurAllumina refinery is located at Portoscuso, on the south west coast of Sardinia in Italy. The refinery began operations in 1973. It consumes more than 2.2 million tonnes of raw material bauxite from the Weipa mine each year and has a capacity of one million tonnes.

(c) Reuters 2006

Alumina - Focussed on maintaining world share

egoli.com.au, Australia - Aug 17, 2006

see the original article (with costcurves etc.) at:

http://www.egoli.com.au/egoli/egoliStockIdeasPage.asp?PageID%7B7B142430-DDA4-428A-B14C-9F960B59641D%7D

Alumina Limited (AWC) is a minority (40%) holder in the world class AWAC JV with Alcoa. AWAC is focussed on maintaining its share of the world alumina industry with plans in place to expand output from 13.7mtpa to over 17mtpa from CY09.

Expenditures on these projects will consume US$2.7b. Due to the JV arrangement funding will be via JV cash flow.

Key Points

▪?? 1H Profit: For the 1H AWC reported a 93% jump in underlying earnings to $302 in line with expectation. The result was achieved on a 3.3% increase in AWAC alumina production to 7mt. Headline profit was $260m which includes restatement of balance sheet items against currency movement. A 10c ff final div was declared, record date 15th Aug.

▪?? During the current growth phase AWC expects to maintain dividend flow despite the 25%-30% reduction in cashflow received. Short-term debt facilities (A$700m) are in place whilst a franking flush from AWAC has allowed these dividends to be fully franked. Given the strong metal price cycle we believe AWC will be in a strong position to increase dividends from CY08.

▪?? Growth Opportunities: Near term committed alumina expansions at Pinjara (WA), Jamalco (Jamaica), and Alumar (Brazil). Longer term opportunities at Kwinana (WA), Suralco (Suriname), Guinea and Vietnam.

Outlook

For every US1c/lb movement in metal price alumina NPAT alters by approx A$13m. For every 1c movement in A$:US$ rate NPAT varies by A$7.2m.

Moving forward AWC will remain a leverage play to aluminium. However the recent share price fall from $8ps to current levels appears to have already factor in a weaker metal price.

Alumina/aluminium metal price v costs for production

Recently the aluminium price surged to US$3,100/t (US$1.40/lb) prior to settling around current level of US$2,500/t (US$1.13/lb). At these levels price appears to be well above prices experienced throughout the last decade and this spike appears to have been brought firstly by tight markets and second by financial traders.

Ultimately a combination of substantial increases in production costs (energy, electricity, labour, exchange rate, inputs), underinvestment in the 1990’s combined with strong demand (China led) are reasons behind the price strength.

Whilst on an absolute basis the aluminium price appears uncomfortably high once adjusted for inflation and the chart below is the longer term price which shows the price has been at or above these levels for sustained periods (ie 2 to 3 years) in the past.

In addition we note US$ price weakness experienced in 2000 to 2002 was accompanied by weak currencies in Australia and in several South American countries and this helped maintain producer margins during the period.

In A$ terms price has been less volatile than the US$ price for at least the last decade.

Cost pressures have been a concern of the market, particularly so when AWC highlighted a US$26/t alumina cost increase with it CY05 result and highlighted the potential for a further US$14/t increase.

A higher A$ had some impact, but industry inflation along with rising input prices (caustic, energy and bauxite) all play a role. Despite this margins have been growing.

In addition several other major producers highlight similar cost increases to level above AWAC and as such we believe they (BHP, RIO Alcan and AWAC) will have a strong incentive to recover these increases similar to BHP’s view on iron ore.

In short the alumina industry is tightly controlled and this should assist margins throughout a cycle in addition to AWAC operations remaining in the best operating cost quartile.

Growth Profile

Ongoing capital investment for additional alumina capacity is expected to be strongly value accretive across a normal commodity cycle in addition to providing growth momentum through to the end of the decade.

In addition the majority of growth is located at existing sites and as such lead to better economies of scale and lower costs. As Rio Tinto once said building a greenfields smelter is likely to generate a sub economic return but expanding an existing operation would generate a strong return.

Thus you need a smelter to expand a smelter. AWAC is very fortunate in that the majority of its operations fit in to this category combined with cheap energy.

Quality Portfolio of Assets

AWAC’s network of eight alumina refineries primarily operate in the lowest quartile of the global cash cost curve with the US based Pt Comfort considered the swing producer. The three WA operations assist in this cost performance.

The majority of operations provide a solid platform for additional brownfield expansion capacity. Additional capacity then offers cost advantages of up to 30% over greenfield sites.

Australia

During the June quarter the efficiency upgrade to the Pinjarra refinery was completed. Finally cost US$510 (A$670m) up from A$550m (Dec 05) compared to A$440m pre investment.

This equates to a marginal capital cost of US$1000/t for the additional 657kt of capacity the upgrade provides. Ramp up to full production is expected during 2H06.

Longer term projects include the plus 2mtpa upgrade to the Wagerup plant. Environmental approval has been given however Ministerial approval is still pending as community concerns remain (ie health and environments effects).

AWAC believes this expansion is the most attractive of the whole portfolio.

Brazil

A key growth area is the 2.1mtpa expansion of the Alumar operations in Brazil. AWAC has a 54% interest in the expansion which is due on stream 2H08. The operation is to use coal as the primary energy source.

Net cost to AWAC is estimated at US$1b inclusive of the Juruti Bauxite developemnt to feed the refinery.

Costs will be kept under tight review with AWC noting the appreciation of the Brazilian Real.

Jamaica

Capacity of the Jamalco (Jamaican) refinery recently lifted output by 250ktpa to 1,250ktpa. A further 150ktpa debottlenecking exercise is currently under way for a cost of US$77m, this incremental volume is due to impact 4Q06.

In addition AWAC is awaiting finalisation of a gas supply agreement (to replace oil) to justify a further 1.35mtpa expanstion for a cost of US$1.2b or US$888/t of capacity. The development is still scheduled to impact 2H08 but gas supply negotiations are yet to be finalised.

Conversion to gas and expansion of the plant would offer strong cost savings and hence justify the higher per unit capital cost.

Longer term AWAC believes the Suralco (Brazilian) refinery has further capacity potential of 1,850ktpa.

Producer Commentary

AWC report that the aluminium market is expected to remain in deficit throughout 2006. Demand is strong in most markets worldwide with Chinese demand still a key driver.

Alumina markets are moving to a more balance position with low inventory levels worldwide and new Chinese refinery capacity adding significant production in 2006.

Alcoa and other commentators expect strong markets to continue for a least another 2 years supported by low stockpiles and strong demand. Alcoa’s belief is that aluminium consumption will double by 2020.

BHP and RIO have iterated similar sentiment at recent aluminium briefings. In short both expect strong markets to continue into the foreseeable future driven by ‘China’ and to some extent India as both countries continue to build cities as the rural population migrates to the cities.

DISCLAIMER: This report is published by SHAW Stockbroking Limited ("SHAW") in good faith based on the facts known to it at the time of preparation and does not purport to contain all relevant information in respect of the Financial Products to which it relates. Any projections are estimates only and may not be realised in the future. SHAW has prepared this report for multiple distribution and without consideration to the investment objectives, financial situation or particular needs ("Objectives") of any individual investor. Accordingly, any advice given is not a recommendation that a particular course of action is suitable for any particular person and is not suitable to be acted on as investment advice. Readers must assess whether or not the advice is appropriate to their Objectives before making an investment decision on the basis of this report. Readers can either assess the advice themselves or if they require a recommendation personal to them, they should seek the help of their SHAW client adviser. This research has been prepared for the use of clients of SHAW and its wholly owned subsidiaries and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose the information in this research in any way. Nothing in this research will be construed as a notification to buy or sell any Financial Products, or to engage in or refrain from engaging in any transaction in a Financial Product. This research is based on information obtained from sources believed to be reliable but SHAW does not make any representation or warranty that it is accurate, complete or up to date. SHAW accepts no obligation to correct or update the information or opinions in it. Any persons relying on the above information does so at their own risk. Except to the extent that liability under any law cannot be excluded, SHAW disclaims liability for all loss or damage arising as a result of an opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence. SHAW will charge commission in relation to client transactions in Financial Products and SHAW client advisers will receive a share of that commission. SHAW, its associates and their respective officers and employees may earn fees and commission from underwriting Financial Products and may act as principal in respect of or otherwise have interests in the Financial Products. Analyst Independence: The Research Analyst who prepared this document hereby certifies that the views expressed in this document accurately

Russia forming biggest aluminum maker

Market-Day.net, AZ - August 21, 2006

MOSCOW, Aug. 21 (UPI) -- Russian aluminum giants Rusal and Sual will merge to form a national monopoly that will also be the world's largest aluminum producer.

A merger of Rusal, the world's third-largest aluminum producer behind Alcoa and Alcan, and Sual, the world's sixth-largest aluminum producer, would control 100 percent of Russia's aluminum market, Kommersant reported Monday.

Together they would produce more than 7 million tons per year by 2013, analysts said.

Copyright 2006 by United Press International

SUAL Group Appoints Shell Global Solutions in Their Drive for Continuous Improvement

Russia Newswire (press release), Russia 21/08/2006

MOSCOW (RNWire) - A progressive aluminium company in Russia is seeking advice on best practice from outside the metals' industry.

SUAL Group, the world's sixth largest aluminium producer has appointed Shell Global Solutions to develop a business improvement plan for its IrkAZ smelter in southern Siberia, one of Russia's largest aluminium plants producing 293,5 ktpa in 2005.

The appointment is in line with SUAL's ongoing strategy for the long term performance enhancement of its smelting operations. Shell Global Solutions has embarked on a consultancy programme that will assess the plant's current maintenance, contracting and procurement strategies and processes, against ‘best-in-class' practices at other top performing companies.

SUAL expects the evaluation to result in recommendations for the introduction of new business processes that will help increase maintenance productivity and efficiency, as well as improve equipment reliability and asset performance. Additionally, the evaluation will support the optimal execution and introduction of the SAP R3 Maintenance and Materials' Management Modules.

Wayne Hale, SUAL Holding Senior Vice-president Upstream, said: «Shell Global Solutions has a reputation for operational and technical excellence, and its consultants can offer us an approach to improvement that has been tested in top performing companies within a number of industries and across a number of geographies.»

Working in tandem with staff from the IrkAZ plant, operational performance will be considered against a wide range of indicators, both from within and outside the aluminium industry. The assessment will also define the scope of activity needed to implement new practices in conjunction with the implementation of the SAP R3 Maintenance and the Materials Management Modules. It is intended that this will be the framework for best practice rollout to other SUAL upstream facilities.

The inclusion and implementation of risk-based decision making for all aspects of maintenance will be integral to the improvement plan.

The Siberian-Ural Aluminium Company (SUAL) was formed in 1996 by a merger between the Irkutsk and Ural aluminium smelters. Since then, SUAL has made a series of acquisitions that has improved its operating efficiency, while ensuring it produces sufficient raw materials to meet SUAL's evolving production needs.

Dalip Sud, Executive Consultant, Shell Global Solutions BV, said: «IrkAZ already has a very skilled workforce, which is extremely capable of adopting new ways of working. When supported by an optimally configured SAP and new performance measures, we are confident that they have the potential to achieve higher performance and improved plant availability.»

The 236-hectare IrkAZ smelter site lies two kilometres east of the Trans-Siberian railway. Built in the early 1960s, the plant has undergone a series of modifications and expansions to meet its present production capacity of 290Kt per annum, with new production facilities using state of the art process technology.

Briefing note:

SUAL Group is a vertically integrated company and one of the world's top 10 aluminium producers. It unites enterprises that extract bauxite, refine alumina and produce primary aluminium, silicon, semi-finished goods and aluminium products.

SUAL Group's enterprises form a full production cycle, from the extraction of bauxite (over 5.4 million tonnes a year), the refining of alumina (about 2.3 million tonnes a year) and the production of primary aluminium (over 1 million tonnes a year) to the manufacturing of aluminium semi-finished and finished products.

Shell Global Solutions provides business and operational consultancy, catalysts, technical services and research and development expertise to the energy and processing industries worldwide. Shell Global Solutions has over 4500 staff located in an extensive network of offices around the world, with primary commercial and technical centres operating in the USA, Europe and Asia Pacific.

In 2005, Global Solutions supported Shell’s business activities in downstream manufacturing, downstream marketing, gas & LNG, production and project management, and successfully serviced refining, chemicals, gas, metals, pulp and paper and motor-sport customers worldwide.

Clarendon Alumina Production faces bleak future

Jamaica Observer, Jamaica Wednesday, August 23, 2006

Unable to take advantage of rising world prices

Dennise Williams, Business Observer writer

With its future looking bleak, the state-owned Clarendon Alumina Production (CAP) Limited has admitted it is fetching less than 50 per cent of the world market price for its alumina, blaming existing supply contracts to which it is tied.

World demand for steel has pushed alumina prices close to US$491 per metric tonne this year, but CAP has only collected US$194.6 per metric tonne, the company said in its financial statements for the year ending March 31, 2006.

"Our supply contracts have allowed us to capture only a portion of the rising alumina prices ...During the fiscal years 2004, 2005, 2006, the average spot price per metric ton for alumina was US$330, US$368 and US$491 respectively.

Our average price per metric ton sold was US$189.8, US$193.5 and US$194.6 for the same periods," the statement said.

CAP sells almost all the alumina from its Jamalco refinery to Glencore, the Swiss-based commodity trader, at prices which have been fixed until 2010 and 2012 when the supply contracts expire.

The Business Observer last week reported that Glencore was in advanced negotiations with the Russian Aluminium company (RUSAL), one of the world's top three producers, for the partial or total acquisition of its (Glencore) US$600-million assets at Alpart and Windalco.

CAP is a wholly owned government subsidiary which holds a 50 per cent interest in the common assets of the Halse Hall, Clarendon refinery, Jamalco. The other partner in the joint venture is Alcoa Minerals of Jamaica (Alcoa), which also acts as operating manager.

The financial statements also revealed that in addition to depressed prices, CAP also faces rising input costs that have led to a loss position, which wiped out its gross profits from the previous year.

Cap had net sales of 645,808 metric tonnes of alumina with a net value of US$124.9 million as at March 31, 2006. This compared favourably with sales of 590,328 and net sales of US$113.5 million.

However, as revenues were contained, the company suffered a gross loss in 2006 of US$0.4 million, compared with a gross profit of US$30.2 million in 2005, the financial statements said.

"The decrease was primarily due to an increase in the cost of sales as a percentage of net sales in 2006 as compared with 2005."

The cost of sales included bauxite extraction, fuel, caustic soda, labour, repairs and maintenance, among others. The average purchase price of Bunker C fuel increased by 62.5 per cent in 2006 to US$38.89 per barrel from US$23.93 per barrel in 2005, and increased by 17.3 per cent in 2005 from US$20.40 per barrel in 2004.

The average price of caustic soda, a key additive to bauxite, increased in price by 69.6 per cent in 2006 to US$280.67 per metric ton from US$165.47 per metric ton, in 2005 and it increased by 18.5 per cent in 2005 from US$139.64 per metric ton in 2004."

Overall, CAP made a net loss after taxation of US$30.7 million as at March 31, 2006, a further erosion over the US$26.4 million net loss after taxation in the corresponding 2005 period.

"Net loss increased by 16.3 per cent or US$4.3 million is net of factors explained (rising cost of inputs) affecting the operating profit plus the tax charge of US$12.5 million resulting from the impairment in 2006 of our deferred tax assets," the financial statements disclosed.

But the picture got gloomier when the depressed prices and increased input expenditure were added to the prospects from the proposed Jamalco refinery expansion.

Jamalco is currently contemplating a major expansion of its refinery to increase its current capacity of 1.275 million metric tonnes of alumina per year to 2.8 million metric tonnes of alumina per year. The cost of the expansion project, which includes construction of a gas-fired power plant, is estimated to be US$1.2 billion. Although Alcoa is expected to finance 100 per cent of the project, it has not made a final investment decision.

Should Alcoa not expand the Jamalco refinery, it would impact directly on CAP's bottom line, the statements cautioned.

"As part of the expansion, Jamalco is undertaking an early works programme at a cost of US$77 million, all of which is being financed by Alcoa, contingent on the expansion going forward. "However, if the expansion project for any reason were not to occur, we would be liable for US$38.5 million of the early works programme cost under the terms of the existing joint venture agreement. We might not have the liquidity to pay our portion of these costs."

The financial statements added: "Historically, we have relied on a variety of methods to manage our liquidity, including calls on the Government for the injection of equity to provide working capital support; the provision of guarantees by the Government for significant portions of our indebtedness; undertakings by the Government to ensure our performance under our supply agreement obligations; and access to lines of credit and short and long term financing from financial institutions and related parties."

However, the CAP management was careful to note that it believed that the cash from operations, current financing liabilities and cash and cash equivalents would be sufficient to satisfy its expenditures and debt service on its liabilities in 2007 and 2008.

The directors highlighed in the financial statements were Dr Carlton E Davis and Dr Vincent Lawrence, directors of CAP since 1988 and 1989 respectively. "In addition, we have the benefit of the extensive financial expertise of directors Murna Morgan, a senior director at the Ministry of Finance and Planning, and Shirley Tyndall, who served 16 years as the government's financial secretary."

Last month, Dr Lawrence resigned from all government-affiliated boards in the wake of the Sandals Whitehouse scandal. According to Winston Hayden, manager of CAP, "I know that Dr Lawrence is no longer on our board of directors but I haven't seen the resignation letter".

SUAL, Hydro may build smelter close to Vanino port

Interfax Russia, Russia Aug 24 2006 12:37PM

MOSCOW. Aug 24 (Interfax) - SUAL (RTS: SUAL) and Hydro Aluminum may build an aluminum smelter close to the port of Vanino, Viktor Ishayev, governor of the Khabarovsk territory, told a press conference at the Interfax central office.

Ishayev said Vanino was one of the options under discussion. This would be a convenient location as the port ships in alumina and could be used to export finished products, Ishayev said.

He said energy supplies to a smelter in Vanino were also being discussed.

SUAL, which is Russia's second biggest aluminum company, the HydroOGK generating company and Norway's Hydro signed a Memorandum of Understanding on the construction of an aluminum smelter in Russia's Far East at the beginning of August.

It is thought the smelter will have the capacity to produce 600,000 tonnes of aluminum per year. It will need 9 billion kilowatt-hours of electricity or more than a fifth of the whole Far Eastern power industry's output. The Bureiya hydroelectric plant and the planned Nizhnezeiya and Nizhnebureiya plants and plants in southern Yakutia are potential sources of electricity.

Alcoa faces more than $9 million in pollution fines

Oxford Press, OH Thursday, August 24, 2006, Cox News Service

By ASHER PRICE

AUSTIN, Texas — In the annals of coal-fired power plants in Texas, this summer could prove to be a hot one.

On Friday, environmental groups and the federal Department of Justice will square off against Alcoa, a Pittsburgh company that runs an enormous aluminum smelting operation in Rockdale, in a federal district court in Austin over whether it may put off pollution controls at its facility. In July the justice department fined Alcoa $9.2 million for exceeding pollution limits at the plants that power the smelters.

And on Wednesday a pair of judges recommended that TXU Corporation, the biggest producer of electricity in the state and a company that is proposing 11 new and expanded plants around Texas, be denied an air permit for its proposed Oak Grove power plant near Franklin, north of Bryan.

The Alcoa case involves a collision of interests stemming from a 2003 settlement between the company and three citizens groups that alleged it had illegally released more than one million tons of air pollution over a 17-year period.

As part of the settlement Alcoa was required to pay a fine of $1.5 million and to spend $2.5 million on environmental mitigation projects in Central Texas. The company also opted to build new power units to replace its old ones.

Alcoa is trying to sell ownership of its air permits for the coal-fired plants that power its smelter to TXU. Under the deal, Alcoa would close down its three generating units and TXU would build a new one. But Alcoa is trying to loosen the emissions controls in the 2003 agreement to make the ownership change more appealing to TXU.

Environmental groups say any changes in the ownership may only be considered as long as the terms of the settlement are met. But the justice department is demanding Alcoa pay nearly $9.2 million for exceeding sulfur dioxide emissions limits 36 times and opacity emissions limits 1,783 times between mid-2003 and mid-2005. Opacity serves as a surrogate test for a host of pollutants, according to Jim Marston, the head of the Texas office of Environmental Defense.

"Realistically that's not going to be the final amount," said Travis Brown, who heads Neighbors for Neighbors, a group that filed lawsuits against Alcoa. "They're going to be negotiated down. Alcoa's going to argue they have legitimate excuses for the pollution."

"But it could be a few million dollars It's not often you see millions of dollars out there."

The Alcoa plant employs more than 1,100 people, and the company says transferring ownership to TXU and building a new plant is critical for maximizing its smelting abilities and staying competitive.

"Are they actually violations? We'll go through the individual claims," said Kevin Lowery, a spokesman for Alcoa. "They have nothing to do with the permitting."

TXU meanwhile has to deal with the implications of Wednesday's decision by two administrative law judges.

The judges, Carol Wood and Thomas H. Walston, recommended the commission find that Oak Grove, which would be built about 100 miles northeast of Austin, failed to prove that it will achieve the required pollution standards.

The case will not go before the commission for at least a month.

TXU tried to spin the reading as a victory.

The ruling "underscores the aggressiveness of TXU's proposal," said spokeswoman Kimberly Morgan.

Environmentalists heralded the ruling.

"We are very happy with this decision," said Karen Hadden, who heads the Sustainable Energy and Economic Development Coalition. "It matters for Austin. Pollution from this plant would affect health here in Austin."

Asher Price writes for the Austin American-Statesman.

CEC Designs Unique Annealing Furnace for Southwire Company

NewswireToday - /newswire/ - Kennesaw, GA, United States, 08/28/2006 - Southwire, the largest producer of electric cable and wire in the United States, has signed a contract with Consolidated Engineering Company to manufacture and install an aluminum wire-annealing furnace in their Kentucky production facility.

Southwire, the largest producer of electric cable and wire in the United States, has signed a contract with Consolidated Engineering Company to manufacture and install an aluminum wire-annealing furnace in their Hawesville, Kentucky production facility. This furnace will increase the facility’s annealing capacity by 14 spools of aluminum wire, each weighing 12,500 lbs, in every 12-hour shift.

This project was unique in its challenges. Southwire required a highly efficient annealing production process, but the design had a height constraint of 19 feet because of existing equipment. CEC proposed a mobile furnace that moves back and forth between load stations, immediately after each load is finished annealing. This, coupled with a stationary door design that allows the furnace to fit within the height requirements, proved to be the best answer to Southwire’s needs and significantly increased productivity with a decreased floor space requirement.

"The design that is being implemented at Southwire is both innovative and efficient," said Paul M. Crafton, President of Consolidated Engineering. "We are known for working with our customers to solve challenging issues and give the best service possible, which is what ultimately proved to be our unique differentiation in this project."

This new mobile annealing furnace will increase Southwire’s aluminum wire production by 350,000 lbs a day.

About Southwire Company

More than 50 years ago, Southwire was founded to help bring electricity to rural Georgia. Today, it supplies 135 of the nation’s top power companies, plus dozens of utility companies abroad and is pioneering new technology to better serve all of its wire and cable customers. Nearly a fifth of all homes in the United States contain Southwire’s building wire products.

About CEC

For nearly 50 years CEC has been building its reputation as a world leader in quality heat processing technology. Over the years CEC has experienced phenomenal growth with over 3,400 installations worldwide, of which 60% are from repeat customers. With a comprehensive background in innovative heat processing technologies, and 70 U.S. and foreign patents, CEC can help turn any heat processing challenge around by lowering labor costs through increased automation, efficient process control and reduced energy consumption, while maintaining consistent product quality. CEC specializes in Aluminum Casting Heat Treatment Systems.

Agency / Source: Consolidated Engineering Company

Alcoa Invests in New Coal Mine

Inside INdiana Business (press release), IN 8/28/2006 9:35:44 AM

A new coal mine in southern Illinois has begun shipping coal to Alcoa Warrick Operations in southwest Indiana.

The Friendsville Mine, which opened over the weekend, represents a $55 million investment by Alcoa and will be managed and operated by Vigo Coal Company, Inc. The mine is expected to supply one million tons of coal each year to the Alcoa Warrick Power Plant.

Source: Inside INdiana Business

MT. CARMEL, IL: August 26, 2006 – Vigo Coal Company, Inc. and Alcoa cut the ribbon today on the tri-state’s newest coal operation, the Friendsville Mine. The mine represents a $55 Million investment by Alcoa and will be managed and operated by Vigo Coal Company, Inc.

"Friendsville Mine represents a tremendous opportunity for Vigo Coal Company, Inc. to extend our relationship with Alcoa and develop an impressive coal mine here in Southern Illinois," said Mike Schiele, Chief Executive Officer of Vigo Coal Company, Inc. "We have been pleased with the welcome that this community has given to us and with our ability to find the complement of high-quality employees to operate the mine."

Royce Haws, Warrick Operations Primary Metals Location Manager, added, "the primary aluminum market is incredibly competitive with smelters around the world hanging in the balance with their power supply contracts. The Warrick smelter depends on cost-competitive power supplied by the Warrick Power Plant. This partnership with Vigo Coal Company, Inc. provides an opportunity to help control costs at the Warrick smelter, securing jobs for years to come."

Friendsville Mine has been under development for more than a year and earlier this week shipped the first delivery of what will be more than 1 million tons of coal each year to the Alcoa Warrick Power Plant via railcar. Alcoa has invested $55 Million, including $30 Million in infrastructure and buildings and $13 Million in mobile equipment. More than 50 employees are working presently with several more still needed to fill open positions. The mine will contribute more than $10 Million to the regional economy each year through payroll, purchases and taxes.

Novelis fires CEO after profit warning

Reuters Tue Aug 29, 2006 2:56pm ET

NEW YORK, Aug 29 (Reuters) - Aluminum products maker Novelis Inc. (NVL.N: Quote, Profile, Research) (NVL.TO: Quote, Profile, Research) fired its President and Chief Executive Brian Sturgell on Tuesday, following a profit warning and a dividend cut due to soaring costs.

The company, which has also struggled in the past year to file its financial statements on time, said Chairman William Monahan will serve as interim chief executive until a replacement is found. The moves are effective immediately.

Spokesman Charles Belbin said Sturgell's employment was terminated because "the board made a decision that the time was right to make a change and bring in fresh leadership."

On Friday, Novelis forecast a loss for 2006 due to high aluminum costs and price ceilings in contracts with its customers. Three days later, it cut its quarterly dividend to 1 cent per share from 9 cents.

Atlanta-based Novelis, spun off from Canada's Alcan Inc. (AL.TO: Quote, Profile, Research) in January 2005, said it has begun an external search for Sturgell's replacement.

Sturgell was not immediately available for comment. But Belbin said the executive had sent an internal memo to employees indicating that he understood the decision.

The company said Sturgell will remain available to advise the chairman during the transition period.

Novelis' New York Stock Exchange-traded shares fell 96 cents, or 4.9 percent, early on Tuesday but rallied later and in afternoon trading were up 98 cents or 5 percent at $20.64. The shares had lost about 10 percent of their value since the company's warning on Friday.

Novelis buys aluminum to produce sheets for beverage cans and other industries. It said last week that surging prices for aluminum, combined with contract caps on how much of that cost it can pass through to customers, have had a "significant negative impact" on its 2006 performance.

Aluminum for three-month delivery <MAL3> on the London Metal Exchange has been drifting sideways near $2,500 a tonne recently during the slow summer season. And while prices have fallen sharply since hitting their May peak at $3,300 a tonne, they remain historically high.

Novelis also has said it expected results to take a hit from its extensive financial restatement and review process, which was completed in May.

At that time, the company restated its consolidated and combined financial statements for the first and second quarters of 2005 and reported its completed results for the third quarter of 2005.

As a result of the process, filing of the company's 2005 annual report was delayed until last Friday. Novelis posted net income of $90 million for 2005, compared with $55 million for 2004, it said.

Its quarterly reports for the first and second quarters of 2006 have been delayed, and the company said it was aiming to file its 2006 first-quarter report in mid-September.

It expects to become current with its financial reporting when it files its third-quarter report during the fourth quarter.

© Reuters 2006. All Rights Reserved

Russian merger to create world aluminium giant

Peninsula On-line, Qatar : 8/31/2006 1:58:40 Source ::: REUTERS

MOSCOW Russia’s leading aluminium firm, Rusal, will take over its main competitor Sual and the aluminium assets of Glencore to create the world market leader, two sources close to the deal said yesterday.

The transaction, which may be finalised by October and create a company worth around $30bn, would confirm Russia’s renaissance as a world powerhouse in energy and strategic commodities after its post-Soviet economic collapse.

"The new company will be the world’s number one aluminium producer with output of 4 million tonnes per year, and also the top alumina producer with output of 11 million tonnes," one source said.

Rusal, Sual and Swiss commodities trading house Glencore all declined to comment. Rusal is the world’s third-largest aluminium producer after US Alcoa Inc and Alcan Inc of Canada.

The Financial Times estimated the value of the deal at $30bn and said the combined company would be chaired by Brian Gilbertson, the head of Sual, and run by Alexander Bulygin, who is chief executive of Rusal.

Completion of the takeover would crown Rusal’s 38-year-old owner, Oleg Deripaska, as Russia’s undisputed aluminium king after a long and often brutal struggle for control of industry assets in the 1990s known as the ‘aluminium wars’.

Deripaska, Russia’s sixth-richest man with a fortune estimated at $9bn by Forbes magazine, has excellent establishment connections — he is related by marriage to former President Boris Yeltsin.

He met President Vladimir Putin for one-on-one talks earlier this month, and is likely to have received Putin’s blessing for the aluminium deal to go ahead.

The new company would be listed on the London Stock Exchange within three years under a non-binding agreement signed by the three parties last Friday.

"This idea is under consideration," a second source said, declining to elaborate on the IPO’s terms.

Banking sources said that UBS and JP Morgan were advising on the deal. Both investment banks declined to comment.

Putin has capitalised on booming oil and commodities prices as a means to recover Russia’s lost status as a great power. A national aluminium champion would join state-controlled gas monopoly Gazprom in projecting power abroad.

N. America warily eyes Russian aluminum mega-deal

Reuters Wed Aug 30, 2006 4:27pm ET

By Steve James

NEW YORK, Aug 30 (Reuters) - News that two Russian aluminum producers plan to merge and form a world leader shifts the industry's focus away from North America and raises concerns about whether the region's companies are now takeover targets, analysts said on Wednesday.

"As the world moves away (from America), ultimately some U.S. companies could end up being bought out by these (Russian) companies," said Peter Schiff, president of broker-dealer Euro Pacific Capital.

"Russia's move is to be a price-maker rather than a price-taker in the aluminum business, the same as they want to be in the energy business," said Frank Holmes, chief executive of U.S. Global Investors, a $5-billion fund with investments in metals and mining companies.

They were responding to reports from Moscow that Russia's leading aluminum firm, RUSAL, will take over competitor SUAL and the alumina assets of Swiss commodities trading house Glencore.

Two sources close to the deal told Reuters the transaction, which may be finalized by October and create a company worth about $30 billion, would confirm Russia's renaissance as a world powerhouse in energy and strategic commodities after its post-Soviet economic collapse.

"Russia is getting all the big players, they are huge in oil and gas and mining and they have amassed huge foreign reserves as the world continues to need these resources," Schiff said. "As Russia becomes more important, it minimizes America."

RUSAL is the world's third-largest aluminum producer, after Pittsburgh-based Alcoa Inc. (AA.N: Quote, Profile, Research) and Canada's Alcan Inc. (AL.TO: Quote, Profile, Research) (AL.N: Quote, Profile, Research). Sources told Reuters the new company would be the world's No. 1 aluminum producer with annual output of 4 million tonnes, and also lead in production of alumina -- which is extracted from bauxite and smelted into aluminum -- with output of 11 million tonnes.

Driven in part by economic growth in China and India, aluminum demand has soared in the last couple of years, pushing up the price.

Aluminum for three-month delivery <MAL3> on the London Metal Exchange has been drifting sideways near $2,500 a tonne recently. But while prices have fallen since hitting their May peak at $3,300 a tonne, they remain historically high.

Dick Evans, president and chief executive of Alcan, said a Russian merger would not alter the Montreal-based company's focus on proposed expansion of aluminum and alumina production, or spur it into seeking a business combination with Alcoa.

"Our focus has never been to be No. 1 in primary metal production. It's to be a low-cost producer, a technology-based company with a leading edge and a leading cost position," Evans told Reuters.

Charles Bradford, an industry analyst with Bradford Research/Soleil, said the significance of the merger was the impact the new company's size will have.

"If they (Russians) were to withhold production, that could be helpful. In other words, if the price falls and they close down some capacity, it would be a plus for everybody.

"But on the other hand, if, as a merged company, they have more access to capital and grow, it would be a negative as there would be more capacity."

Schiff said an increasing industry focus away from North America could make U.S. companies move vulnerable to takeover.

"Look at our current account deficit, some of the foreigners will want to do something with that," he said. "They don't want to buy U.S. retailers though, but rather companies that can generate global revenues from key resources.

"This consolidation will continue, at least as long as metal prices continue to rise," he added. "That's until the company prices become too high."

© Reuters 2006. All Rights Reserved

Judge allows smelting company to sell air permit

Austin American-Statesman (subscription), TX Wednesday, August 30, 2006

Alcoa, TXU prevented from attempts to change agreement that figures into pollution levels.

By Asher Price

A federal judge has ruled the nation's largest aluminum manufacturer can sell an air permit for a Rockdale power plant to the state's largest electrical producer, but he stymied efforts by the two companies to relax the terms of a settlement agreement designed to limit pollution in the region.

Alcoa, the Pittsburgh-based manufacturer that runs an enormous smelting operation in Rockdale, had sought changes to a 2003 settlement agreement it signed with citizen groups. The changes would have made its deal for the transfer of the air permit more favorable with TXU Corp., the electrical producer. But Judge Sam Sparks was unconvinced by the companies' arguments, and urged them to meet with citizen groups again to reach a compromise.

"Alcoa and TXU Sandow (a subsidiary of TXU), for their part, have sought far more than they could have ever reasonably expected to receive, including alterations to unambiguous terms in the (settlement) and an extension of three-plus years to complete a project Alcoa originally agreed it would finish over the course of just two years," wrote the judge in the court order filed Tuesday afternoon. "The Citizens Groups, on the other hand, appear to be unwilling to come face to face with the cold, hard fact that no amount of trying will get the (new power plant) up and running by the originally agreed-upon date."

Under the terms of the settlement agreement, which came about after three citizens groups alleged that Alcoa had illegally released more than 1 million tons of air pollution during a 17-year period, Alcoa was required to pay a fine of $1.5 million and to spend $2.5 million on environmental mitigation projects in Central Texas. Forced to pick from a menu of other options, the company also opted to replace the old plants with a cleaner one by April 2007.

But deals with a pair of electrical companies fell through, and Alcoa argued that by the time it came to an agreement with TXU last year, the 2007 deadline became an impossible burden.

Alcoa had asked the court to move back the deadline for the new power plant to July 2010. In return, it offered to shut its existing units by the end of this year instead of the 2007 deadline. In its briefing, it called the deal an "equitable quid pro quo," arguing the air quality in the interim would improve for local residents.

But Sparks was unconvinced the deal would be better for public health in the long run.

"Alcoa will be consuming power in Rockdale, and that power will have to come from somewhere else," Sparks wrote. "(T)he Court has no way of knowing where the interim power will come from, how clean the power source will be, or who will be affected."

TXU had argued market conditions and Alcoa's inability to move forward with the earlier electrical companies should buy it more time to build a new power plant.

But the judge wrote in his opinion that the market conditions were already in play at the time the settlement was signed in September 2003, and that Alcoa never followed court-ordered procedures even as it knew of the impending deadlines.

asherprice@statesman.com; 445-3643

Kitimat has its merchants of misery

My View By ROGER HARRIS

THE CRAZINESS coming from Kitimat over Alcan's $2 billion smelter announcement is beyond belief.

Kitimat mayor Rick Wozney is quoted in the Globe and Mail as stating "Alcan's plan is to build a smaller, more efficient smelter than what exists now." In fact, the new smelter is a full 60 per cent larger than the existing smelter.

Focusing on the 500 jobs being lost is absurd. What we really have is an investment in a new facility that will ensure the security of high-paying aluminum jobs for the next 35 to 50 years.

One look up the highway at Skeena Cellulose tells the story of what happens when you don't modernize. You don't lose a few jobs, you lose them all.

The other comment coming from Kitimat critics is that a larger smelter consuming all the power available would employ 1,200 -1,300 people.

This may make a good sound bite but it just isn't the case. Alcan has chosen a form of modernization that will refit the current infrastructure.

The plant will employ about 1,000. A larger smelter would be a new stand-alone facility, incorporating a greater number of efficiencies, employing also about 1,000 people. More aluminum does not equate to more employment.

A recent District of Kitimat ad boldly states "Power Sales Increase." What a bunch of bunk. The new smelter will consume more power than ever before in the smelting process, leaving considerable less power available for sale into the grid.

The smelter first provision in the deal ensures that in a low water situation, like what happened in 2001, smelter needs would come ahead of the contract to supply B.C. Hydro.

It will probably come as no surprise to anyone that the deal that established the sale of electricity to B.C. Hydro as the priority was negotiated in the 1990s by the then NDP government. This one finally reverses that mistake.

Then there are the comments around the vicinity of the "works." This is almost comical if the impacts weren't so tragic.

The "works" as described in the 1950s agreement includes the towns and industrial sites but also the dams and spillways. The purpose of this definition was to capture all of the affected parties to the 1950s project. Well, the dams and spillways are at the other end of the reservoir which is why it is important that any plan around Alcan include those folks as well.

It is the reason First Nations attended the announcement and welcomed it. They certainly have not benefited from the initial 1950s agreement but have a real opportunity to be part of the future of this one, something that seems to have been lost on the leadership of the District of Kitimat.

This is a good news announcement. The deal addresses the concerns around power sales in a way that works for the community and the company. Rather than these merchants of misery continuing to try and tell the world Kitimat is dying, they should be using this announcement as a platform to secure even more investments.

That is important because now the hard work really begins. We know that over the next six years, whether Alcan expands or not, 500 people will retire. This is a golden opportunity to sit down and plan in a way that gives these folks a reason to stay in the north and in our communities.

It's time to review our support facilities for seniors, look at our recreation and social amenities.

We should be talking with senior organizations today to draft and implement a strategy that could make us the magnet communities in the north for retirees.

When you look at numerous projects on the horizon for the northwest, the real question is how will we attract the workforce that will be needed over the next decade? This may prove to be the biggest challenge. Do we have a plan to market our region to the world from a worker, not tourist, perspective?

With the global attention this project will bring now is the time to make every effort to attract new investment to the area. The security of Alcan's reinvestment in the northwest makes our area even more attractive.

But one thing is for sure. The negative campaign being waged today by Kitimat will only make that task a lot harder.

© Copyright 2006 Terrace Standard

Alcan attacks Kitimat for opposing plans

http://www.canada.com/vancouversun/news/business/story.html?ide92bc2a6-51f1-4777-8648-4abbac580f7b&k77006

Vancouver Sun (subscription), Canada Thursday, August 31, 2006

The city, trying to save smelter jobs, wants a court ruling

Alcan CEO Richard Evans says the company thinks the District of Kitimat believes it can force the company to build a bigger smelter.

Kitimat's challenge of Alcan Inc.'s electricity sales in British Columbia looms as a potential spoiler to the company's plan for a $2-billion modernization of its aluminum smelter in the small northwest city, CEO Richard Evans said Wednesday.

The District of Kitimat maintains that it will not drop its petition to the B.C. Supreme Court seeking a ruling on whether Alcan's sales of electricity violate the 1950 agreement it signed with B.C. to provide smelter jobs in exchange for cheap power.

Evans said he thinks Kitimat believes it can force Alcan to build a bigger smelter that would reduce the impact of job losses the modernization will bring, but a larger project simply isn't in the cards because it wouldn't be economic.

"The potential tragedy of this -- I think it is unlikely, but it is possible -- is that all the legal actions or manoeuvres could delay this project," Evans told a meeting with The Vancouver Sun editorial board.

Modernizing and expanding the Kitimat smelter is Alcan's top priority, Evans said.

However, the plans Alcan has to expand in South Africa, Iceland and Quebec could jump ahead in the development queue if the company's board of directors views Kitimat's legal challenge as a risk to the modernization project's completion.

The five-year modernization, Evans added, would expand Kitimat's smelting capacity by about 60 per cent to 400,000 tonnes per year, and make it the company's showcase lowest-cost, highest-efficiency and least environmentally damaging facility.

Modernization would, however, cut Alcan's Kitimat workforce to about 1,000, a reduction of 500 jobs that Evans said can be accommodated solely through attrition.

Alcan has also set the end of the year as a deadline to clear up three remaining details so that the company's board of directors can make a final decision on the $2-billion Kitimat investment in time to break ground in early 2007, Evans said.

- The B.C. Utilities Commission has to approve Alcan's agreement with the province over electricity use.

- The union that represents Alcan's Kitimat workers also has to agree not to strike before the modernization is complete in 2011.

- And Alcan has to be reasonably certain the project won't hit any roadblocks in an environmental review.

Evans said the modernized smelter would use more of the electricity that Alcan generates from its Kemano generating plant, and cut by half the surplus power that the company sells.

He added that Alcan couldn't physically build a bigger smelter with the electricity that it generates.

So Evans said Kitimat Mayor Rick Wozney should focus on the long-term stability to Kitimat that smelter modernization would bring and the spinoff opportunities for local suppliers that a 400,000-tonne-per-year facility might provide, rather than make a legal push for an even bigger plant.

"In my view, there is zero upside to [Wozney's] strategy, and substantial downside," Evans said.

Wozney, however, was unfazed by Evans' suggestions. He said on Wednesday that Alcan made plans to modernize and expand the Kitimat smelter in 1997, and suggested again in 2001 that it wanted to build up to a 550,000-tonne-per-year smelter.

Now he doesn't understand why Alcan cannot build a smelter of the size it said it could before.

Wozney added that those plans fell through, and doesn't worry about the future of the Kitimat smelter because, ultimately, Alcan won't walk away from its cheap power source at Kemano.

"That's the reason they're here," he said in an interview.

Wozney said the municipality plans on going ahead with its legal challenge to Alcan's power sales, which has a hearing in B.C. Supreme Court that is set to begin in October.

"The bottom-line question is, is what [Alcan is] doing legal or not," Wozney said. "Lets not talk about the smelter size or the amount of electricity they're using."

The union that represents Alcan's Kitimat workers, in the meantime, is remaining reserved in its position on the expansion.

Rick Belmont, president of the Canadian Auto Workers Local 2301, said the union isn't happy that the B.C. government is continuing to allow Alcan to sell electricity rather than using it to make aluminum.

"You can't call a $1.8-billion investment [in the smelter] negative," Belmont said. "We need the new technology for the longevity of the workplace and permanent jobs in the future."

As for the labour peace agreement, Belmont said the union executive is still collecting information on what implications the modernization would mean for the union before calling a membership vote on whether or not to open their contract to accommodate such a deal.

Belmont said the union's existing contract is good until July, 2008.

depenner@png.canwest.com

- This story can be heard online after 10:30 a.m. today at www.vancouversun.com/readaloud.

ALCAN'S KITIMAT DEADLINE

The plan for a $2-billion modernization of Alcan Inc.'s Kitimat aluminum smelter needs to meet three conditions by the end of the year before CEO Richard Evans will recommend the company board of directors grant it final approval:

- The British Columbia Utilities Commission must approve its power agreements.

- Alcan must reach a labour-peace agreement with its union ensuring no labour disruptions during construction between now and 2011.

- Assurance that its state-of-the-art smelter won't hit any hurdles in the environmental approval process.

© The Vancouver Sun 2006

Russian merger is good news, Alcan says

News & Observer, NC Thursday, August 31, 2006

No impact seen on aluminum prices

Alcan CEO Dick Evans says the Russian merger would not alter his company's focus on a handful of proposed greenfield and brownfield expansion projects in aluminum and alumina production.

The chief executive of Alcan Inc. said yesterday he does not expect the reported merger of Russia's top two aluminum companies to have a short-term impact on global production or prices.

"I don't see this as a rationalization combination," said Dick Evans, who is also president of Alcan.

"I see it more as a rollup, and view it primarily toward developing a company that can be stand-alone, publicly traded credibly," he added.

Evans was commenting on reports that RUSAL, Russia's top aluminum company, plans to take over its main competitor SUAL and combine that with the aluminum assets of Swiss commodities trading house Glencore to create a $30-billion concern that would displace world No. 1 Alcoa Inc. Alcan is the world's second-largest maker of primary aluminum.

"Broadly, it's a good thing. I think it represents some consolidation that is not unexpected with the Russian producers," he told Reuters.

Evans said Alcan was not part of discussions regarding the Russian merger. RUSAL is an Alcan partner and Glencore has been both a supplier to Alcan and a customer that bought assets from the Canadian company.

Evans sees logistical synergies stemming from the combination of RUSAL and SUAL, but very limited commercial or technical synergies for the two companies.

"I see no reason why it would trigger a divestiture of assets. I would also not expect any significant anti-trust issues," he said.

As for the merger's impact on Alcan's business plans, Evans said it would not alter the Montreal-based company's focus on a handful of proposed greenfield and brownfield expansion projects in aluminum and alumina production, or spur it into seeking a business combination with Pittsburgh-based Alcoa.

"Our focus has never been to be No. 1 in primary metal production. It's to be low-cost producer, a technology based company with a leading edge and a leading cost position," he said.

Evans said he might take a look at Falconbridge Ltd.'s aluminum assets following its takeover by Swiss mining group Xstrata Plc, but he noted there has been no indication yet that those businesses are coming on to the market soon for auction.

© The Gazette (Montreal) 2006