HYDRO SEEKS IMPROVED OPERATIONS AND COST SYNERGIES IN JAMAICAN ALUMINA-DEAL
25 May 2004 - Hydro Aluminium

As a part of its chapter 11 reorganisation, Kaiser has entered into an agreement to sell its 65 per cent interest in Alpart to the Russian company RUSAL. According to the Alpart Partnership agreement, Hydro has the right of first refusal on this transaction. Hydro has today decided to exercise this right. Simultaneously Hydro has agreed to sell this interest on to Glencore on identical terms and conditions. This transaction will not generate any accounting gain or loss for Hydro. Hydro has held 35 per cent of Alpart since the late 1980’s, and Hydro’s annual off-take is approximately 550,000 tonnes of alumina.

In terms of the agreement with Glencore, Alpart will change from being operated by a managing partner, to having an independent management. This will enhance management focus and contribute to strengthen the recent positive trends in Alpart. Both owners will be active participants in the Board of Directors.

Furthermore the agreement contemplates an optimisation of bauxite reserves between Alpart and Windalco, an alumina refining company in Jamaica, 93 per cent owned by Glencore. The balance, seven per cent, is held by the Government of Jamaica.

Hydro and Glencore have also entered into a Memorandum of Understanding, committing the parties to explore the possibility of a closer cooperation and utilisation of synergies between Alpart and Windalco. Windalco has an annual production of approximately 1.25 million tonnes of alumina.

Any optimisation of bauxite mining activities, as well as the changes in ownership in Alpart, will be subject to approval by the Jamaican government.

“Hydro believes the agreement with Glencore holds a strong industrial logic that will create value for the companies involved and enhance the position of the Jamaican bauxite and alumina industry”, says Jon-Harald Nilsen, Executive Vice President of Hydro and head of the company’s aluminium operations.

Alumina is the key raw material for the production of primary aluminium. In addition to Alpart, Hydro holds a 34 per cent interest in the Brazilian alumina refinery Alunorte which after the completion of the ongoing expansion will give Hydro the right to an off-take of approximately 1.4 million tonnes of alumina.

Hydro last year had a production of 1,470,000 tonnes of primary aluminium in its seven fully owned and five part owned plants in Europe, Australia and Canada. Approximately. 3 mill.tonnes of alumina is needed for the production of this metal volume. The primary production volume will over the next few years increase due to completion of expansion projects in Norway and Canada.

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