The Tan Rai project in Central Highlands province of Lam Dong, which started alumina production on October 1 last year, went through an assessment of its financial performance conducted by Vinacomin and a report was released last week.
These reports state that the net present value (NPV) of the project was more than VND2.9 trillion with an internal rate of return (IRR) of around 6.86-8.59%.
When compared to the report sent by Vinacomin and the Ministry of Industry and Trade to the National Assembly in May, the newest figures are much lower. Even the predictions made by the Ministry at the start of the project were much higher than the present figures.
In the light of the revised figures, the project will probably face four years of losses instead of the two initially predicted by Vinacomin in its May report. The recouping of capital investment will take 11.5 years instead of the 12-13 years earlier predicted by the industry-trade ministry.
Although the selling price is higher than the production cost at the present state, the group states that cannot ensure good balance sheets in the first four years of the project. They will only concentrate on paying the loan interest and part of the principal as of now.
Unfortunately, since depreciation and loan interest are not factored into the selling price, they would have to find other sources of income to tackle the bauxite losses.
Although the Vinacomin incurred losses of around VND176-258 billion in the project after increasing the investments in the project by 30% last year, the company is hopeful stating the project’s NVP will rise with a shortened period of accumulated losses as well as a shorter time for recouping capital.
The group forecasts an ambitious pre tax profit at VND161 billion per year and the money to be paid to the State budget with all its charges and fees at VND400 billion per year.
In truth however, the group only paid around VND 100 billion to the State last year and only when they reach a stable production stage can they hit the target of VND400 billion a year.
Vinacomin however, takes a positive approach stating that the Tan Rai project will bring good business results primarily because of two reasons, the slashed corporate tax from 25% to 20% as well as the ban in Indonesian exports, who were the major suppliers for China, opening up an opportunity for Vietnam.
In the first seven months the group has exported 251,000 tons of alumina totaling at about 411,000 tons from last June till now. A total volume of 150,000 tons is expected to be exported to the China-based Yunnan Copper Company Limited this year by Vinacomin. They have also signed a new contract with Japan’s Marubeni Corporation for shipping around 200,000 tons of alumina.
