Russia’s aluminium giant to invest $2 billion in refinery

Linda Yulisman, The Jakarta Post, Jakarta | Business | Wed, June 12 2013, 9:51 AM

Big bucks: Regional Representative Council Speaker Irman Gusman (right) welcomes Russian aluminum giant Rusal CEO and Chairman Oleg Deripaska at his office in Jakarta on Tuesday. (Antara/Widodo S. Jusuf)Big bucks: Regional Representative Council Speaker Irman Gusman (right) welcomes Russian aluminum giant Rusal CEO and Chairman Oleg Deripaska at his office in Jakarta on Tuesday. (Antara/Widodo S. Jusuf)

Russia-based United Company RUSAL, the world’s biggest aluminium producer, plans to build a bauxite refinery in Indonesia to produce alumina, in order to benefit from the government’s ban on the export of unprocessed ores by 2014.

Top executives from the company expressed their interest during a meeting with Deputy Industry Minister Alex Retraubun and industry officials on Tuesday in Jakarta.

They discussed, among other things, possible tax incentives offered by the government for the
proposed investment.

As an initial step, RUSAL would carry out a feasibility study on the alumina manufacturing facility in September, Retraubun said after the meeting.

“If the feasibility study runs to schedule and the plan is realized, it would not be out of the question to see the smelter ready in the next four years,” he told reporters.

The investment plan is a response to stipulations in the 2009 Mining Law which ban the export of unprocessed mineral products starting from 2014.

On several occasions, government officials have reminded mining companies about this stipulation.

Mining companies can build their own refineries and smelters or cooperate with other companies to process their ores to meet the requirements in the law.

RUSAL could spend US$2 billion in the upcoming years to materialize its business plan, the Industry Ministry’s director general for manufacturing-based industry Panggah Susanto said.

The refinery would likely be located in West Kalimantan, where bauxite, the major ingredient in the production of alumina, was abundant, he added.

The facility might produce up to 1.8 million tons of alumina per year with the output slated to be prioritized for sales to the domestic market to help the local industry reduce imports.

Alumina is the material used to make aluminium, a light-weight and flexible metal that can be used in a wide range of industrial and consumer goods, including packaging, aircraft, household appliances and electrical components.

At present, Indonesia still cannot produce alumina on its own despite abundant bauxite resources, which has led Inalum, the firm that operates the nation’s only aluminium smelter, to rely heavily on imports.

“The firm [RUSAL] will likely cooperate with a few local firms, particularly those that run the mines to supply the raw material,” Panggah said.

However, RUSAL has not yet appointed a local partner for the planned facility, according to Panggah.

Late last year the Russian Ambassador to Indonesia Alexander A. Ivanov said that RUSAL was mulling setting up a refinery for bauxite or other non-ferrous metals as well as supporting infrastructure such as power plants with a local partner.

Several years ago, RUSAL teamed up with state-owned mining firm PT Aneka Tambang (Antam) to establish a $1 billion bauxite refinery in Tayan, West Kalimantan.

However, the plan was canceled for a variety of reasons, including the worldwide economic crisis.


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