Bosai Minerals Group Company Ltd has signalled its intention to invest US$1 billion in an alumina refinery and aluminium smelter, once the government approves the US$46M deal, which will give it a 70% stake in Omai Bauxite Mining Inc (OBMI).
After two weeks of discussions, Bosai representatives are leaving without the green light to become the 70% shareholder. A decision is expected by February 11.
The principals of the Chinese company had come here to discuss the deal after IAMGOLD, the Canadian company which owns the 70% stake, announced on December 19, 2006 that it had reached an agreement with Bosai, for the sale of OBMI and Omai Services Inc (OSI), a power company.
Director of International Development at Bosai Minerals, Bill Holroyd told Stabroek News yesterday: “We arrived here January 10, with our President Yuan Zhilun and expected to be quickly approved as the new OBMI shareholder… Instead [we] found ourselves in the middle of a disagreement between the shareholders relating to the Block 37 bauxite reserves.”
The manager said Bosai had successfully gone through a lengthy bid process for the 70% share in OBMI and “our decision to leave is due to the fact that the government representative will be in Russia next week and [has requested] an extension to February 11, from the original date of January 22.”
On Thursday, prior to leaving for Russia President Bharrat Jagdeo said government was seeking information from Bosai about its plans for Block 37, a mineral deposit that is part of OBMI’s assets. The reason, he said, was “to see if they are going to use it the way we want it used.”
The President said whichever company takes over OBMI, it would like to see that company move toward alumina production and even an aluminium refinery.
The government is also seeking assurances that safeguards will be put in place for the workers and that the operations will not be scaled down, thereby conferring an advantage on Bosai’s bauxite producing companies in China.
While in Russia, President Jagdeo and Head of the Privatisation Unit,Winston Brassington the government representative in the negotiations with Bosai, plan to meet executives of the Russian bauxite company RUSAL. The President had said that they will discuss alumina production. RUSAL’s subsidiary in Guyana is the Bauxite Company of Guyana Inc, which operates in the Berbice River. RUSAL had also but in a bid for OBMI but was not selected as the preferred bidder by IAMGOLD.
“One of the reasons that Bosai wants to invest in Linden is that we have plans to build an alumina refinery and an aluminium smelter, in two phases. These development plans have been summarized to the government and this is why Block 37 is so very important to our long-term plans,” Holroyd said.
Of course, he said, an operation of this type must have cheap and reliable power “and this will be the biggest obstacle for any company having such plans.” It was noted that a feasibility study for this type of operation usually takes up to three years, but is expected that the first phase will be operating during 2011. The total investment will be around US$1 billion, he said.
The second phase, which will see doubling capacity should be in operation by 2015. According to Holroyd, “when Bosai is approved by the government as the new shareholder, Bosai will be the largest supplier of refractory bauxite in the world – both as a producer (Guyana) and trader (China).”
Bosai believes that the local bauxite cannot presently compete against Chinese bauxite on price, but it will someday when Chinese prices increase to RASC levels. Chinese bauxite cannot compete technically against local RASC bauxite for special refractory brick applications and this provides a minimum production tonnage base, he said. Holroyd expects that the quality of Guyana bauxite will replace Chinese bauxite for welding rod applications, since the Chinese resources are depleting and mines have been closed.
“They [government] are using the same “due diligence”, which BOSAI did when it visited and evaluated OBMI in September last year, “he said, adding “under the terms of the OBMI Partnership Agreement, the government has the ‘right of first refusal’ on any offer.”
And he also agreed that the government must evaluate all options and decide what is best for the employees of OBMI and for the Guyana bauxite industry. “Of course, in order to exercise this right, the government must match the current bid price and pay IAMGOLD US$46 million,” Holroyd said.
Bosai intends to expand the sales of the current products and to develop new ones, noting that work has already begun on this.
OBMI has a current work force of approximately 500 people and the Bosai representative said the company is committed toward being a reliable employer and will be “continuing all the good work which IAMGOLD /CAMBIOR has put into the company during the last 5 years. ” Prior to Cambior (IAMGOLD bought out Cambior in November 2006) taking over OBMI officially in December 2004, it had invested in the then Linmine (now OBMI).
BOSAI is a privately-owned company and mines bauxite in south west China. Holroyd said this bauxite is principally metallurgical grade and is used for the production of alumina.