Paulwell's mining lease plans behind RUSAL's Jamaican Bauxite plant decision

UC RUSAL 's announcement that it has not taken a decision to close its bauxite plant in Ewarton appears to have been influenced by the Government's intention to revoke the special mining lease the Russian firm now holds on two alumina plants — Alpart and Kirkvine — that have remained idle for three years, the Jamaica Observer has learnt.

According to a highly placed Government source, Jamaica's position was clearly communicated to the company's Country Manager Igor Dorofeev at a July 6 meeting at the mining and energy ministry.

Paulwell not happy with the fact that Kirkvine and Alpart have been closed since April and May 2009 respectively.

It was during that meeting, the source said, that UC RUSAL 's intention to slash production at the Ewarton plant by less than half this month and possibly shutter the operations in October for a year was communicated to Energy Minister Phillip Paulwell and his team.

According to our source, that information did not go down well with Paulwell who noted that the Government had recently agreed to a 100 per cent waiver of the bauxite levy to UC RUSAL for a year, effective June 1 this year. The value of that waiver, the source said, was estimated at US$11.38 million.

The Government had also made other concessions to the Russian firm in order to keep the plant open, the source said, adding that in return UC RUSAL was required to implement a number of projects to improve efficiency.

The Sunday Observer was unable to determine what transpired inside UC RUSAL between July 6 and 10. However, on July 12 — two days after Paulwell told Parliament that the Russian firm had decided to close the plant — the company said "the information about Ewarton's closing in October this year does not correspond to the reality".

According to an Associated Press report, UC RUSAL acknowledged that it is considering curtailing operations at some facilities, but said a decision would not be made until September.

In response, Paulwell told the Observer that he was happy that there had been a change of heart subsequent to his representation to Dorofeev. The energy minister also said he hoped that the company's announcement was not a ploy.

"They had made certain demands re the bauxite levy and getting oil, and I hope it wasn't a way of strong-arming the Government," he said, but declined to give specifics.

"If that was the case, then I regard that as a despicable act," he declared, adding that he would summon Dorofeev to a meeting on July 13 to clarify issues related to the future of operations at Ewarton.

At the end of that meeting, which was also attended by other Government officials, the ministry said that Dorofeev indicated verbally that UC RUSAL’s board of directors had not actually taken a decision to close the plant, and submitted to Paulwell a press statement released from UC RUSAL headquarters in Russia.

According to the ministry, UC RUSAL, in the statement, confirmed that no decision had yet been made on the closure of Ewarton Works.

"In accordance with the company's adopted procedures, decisions on capacity curtailments and plant closures are in the competence of UC RUSAL's board of directors. So far, the company's board has not considered issues related to capacity closures and has not taken any decision with this regard," the energy ministry quoted the UC RUSAL statement.

Paulwell, the ministry said, indicated to Dorofeev that the information in the UC RUSAL statement was contrary to what was communicated at their July 6 meeting.

The minister also reiterated a position advanced at the July 6 meeting regarding the closure of the Alpart and Kirkvine refineries.

"Those plants, the minister said, need to become operational, especially in light of the projected upturn in the bauxite/alumina industry," the ministry news release said. "With respect to those mining licences, Minister Paulwell further indicated that he was awaiting legal advice from the Attorney General's Chambers," the news release added.

Section 36 of the Mining Act gives the minister the power to revoke a mining lease if, without the minister's permission, there is no mining for more than six months at the plant for which the lease is held.

According to our sources, Paulwell is not happy with the fact that Kirkvine and Alpart have been closed since April and May 2009 respectively and he has been eager to have the plants up and running again.

"The fact is that we have had several expressions of interest in the bauxite and alumina sector from overseas investors," the source said. "And the minister, fearing that Ewarton's closure would have meant that more than 2,000 persons would have lost their jobs at the three plants in which UC RUSAL has controlling interests, is anxious to engage those investors."

Industry analysts, the source added, have predicted that the worldwide Aluminium industry will rebound by the middle of next year.