Publication: Mining Weekly Issued: Date: 2007-05-25 Reporter: Martin Creamer

Ready to Execute Aluminium Expansion : BHP Billiton in Southern Africa

 

Publication 

Mining Weekly
Date

2007-05-25
Reporter Martin Creamer

Web Link

www.miningweekly.co.za


Southern African aluminium business more than 50% of global Ebit

South Africa's state-owned power utility Eskom has indicated to BHP Billiton it may have power to facilitate the expansion of the two largest of Southern Africa's three operating aluminium smelters in five to six years' time, BHP Billiton Aluminium Southern Africa COO Dr Xolani Mkhwanazi *1 tells Mining Weekly.

The two smelters together produce 1,25-million tons of aluminium a year - 700-million tons from Hillside and 550-million tons from Mozal - and this output contributes significantly towards making BHP Billiton the fifth-largest producer globally.

"We are working together with Eskom in their new-build programme and Eskom has indicated to us that it believes that it will be able to give us the power we need in 2012-13," he says.

Short Notice

On power that BHP Billiton would require to go ahead with expansion plans in South Africa, Mkhwanazi calculates that the proposed Hillside Three Plus expansion project would require another 300MW and Mozal Three another 650 MW.

About three years' notice would be enough notice for BHP Billiton to execute the expansions. "The moment Eskom guarantees the power, we will advance our project plans and ask the Board for approval to move from prefeasibility to feasibility and then to construction," he says.

The market is good, aluminium prices are good and the company is ready to go as soon as power can be guaranteed. Demand is outstripping supply globally and, because of the general shortage of power the world over, the gap between supply and demand is expected to widen.

Present power security at the existing Hillside operation in Kwazulu-Natal and the Mozal operation in Mozambique is sound and backed by long-term power contracts, Mkhwanazi says.

"Eskom's load sheds are within our contractual limits and they have not gone beyond that," the former South African power regulator *2 reports, pointing to Eskom having an installed capacity of 40 000 MW and 2006 peak demand of 32 000 MW.

"So it is not all doom and gloom. It is the peaking time on cold days that can become tricky or when a few power stations are down for maintenance," he says. He adds that any interruptions or load-sheds usually are done with advance notice *3.

Mkhwanazi reports a successful turnaround of BHP Billiton's smaller aluminium smelter, Bayside, also in Kwazulu-Natal.

Bayside has been restructured, its product range rationalised and its sales focused into the domestic market. "We decided that Bayside must supply South Africa and all exports from Bayside have ceased," Mkhwanazi reports.

Once a producer of 200 products, Bayside now produces only 30, having also invested in a world-class casthouse for value-added products and managing to contain its costs despite continued use of older technology.

Mkhwanazi does not expect the emergence of Alcan at Coega to have an impact on BHP Billiton's wider aluminium businesses, which are overwhelmingly export focussed.

While the power that is being allocated to Alcan could in theory have provided the wherewithal for the long- awaited Mozal Three and Hillside Three Plus expansions, Mkhwanazi says that Alcan applied for the power allocation long ago. "There are no ill feelings - we have already expanded two of our smelters and our time for more expansions will come," he says.

He cites skills retention and skills development as his top priorities, along with transformation, meeting the Department of Trade and Industry black economic empowerment codes of best practice, employment equity, affirmative procurement and enterprise development.

African Developments

In Africa, BHP Billiton may build an alumina refinery in partnership with Canadian company Global Alumina, and Middle Eastern companies Dubal and Mubadala.

"Discussion is taking place and we are optimistic that we will get somewhere with that. As one of the most recent movers in Guinea, we may be the ones that end up building the only really modern alumina refinery on a continent which has 40-billion tons of high quality bauxite of the world's 90-billion in total," Mkhwanazi says.

He cautions, however, that a refinery cannot be expected in the short term and that the lack of basic infrastructure in Africa only adds to the timeframes.

The same long timeframes would apply to BHP Billiton's vision of a possible aluminium smelter in the Democratic Republic of Congo (DRC), which can only follow the establishing of power infrastructure and the availability of "stranded" electricity, on which aluminium smelters traditionally feed.

Envisaged, though, is the possibility of building another two-potline aluminium smelter in Africa, similar to Mozal's in Mozambique.

BHP Billiton's other aluminium assets include interests in the Worsley alumina refinery in Australia, and alumina and smelting operations in Brazil and a bauxite mine and refinery in Suriname. The Southern African business represents more than half of global earnings before interest and tax (Ebit) and Mkhwanazi forms part of BHP Billiton Aluminium's global executive.

Edited by: Laura Tyrer

With acknowledgements to Martin Creamer and Mining Weekly.


*1*2    And so here we have it :

Dr Xolani Mkhwanazi was the Chief Executice Officer of the National Electricity Regulator (NER) from 1999 to April 2004.

In January 2004 he asked that his contract with the NER not be extended without providing any explanation.

No wonder why.

In 2005 he became President and Chief Operating Officer on BHP Billiton Aluminium South Africa.

The door revolves.


It seriously needs to be investigated whether he had anything to do with the allocation of Eskom power to the expansion of the Billiton Bayside and Hillside aluminium smelters during the late 90s and early 2000s.


*3      That was the good old days.

With affirmative action Eskom can now dump its load at any arbitrary time.

And it dumps its load for up to 24 hours per week, maybe more, across the country, except for its preferred industrial customers.