BHP Billiton to Sell Guinea Alumina Stake

on Nov 2, 2012

**Global Alumina May Become Majority Owner of Guinea Alumina Project**

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Anglo-Australian mining giant BHP Billiton (ASX:BHP) announced today that it has agreed to sell its one-third stake in a Guinea-based alumina project to one of its joint-venture partners, Global Alumina Corp (TSE:GLA.U).
By expanding its Guinea’s alumina refining operations, Global Alumina is striving towards its vision to become the industry’s preferred major supplier of alumina, the key raw material for aluminium production. The other partners in the Guinean venture, however, Dubai Aluminium (Dubal) and Mubadala Development, hold 25 per cent and 8.33 per cent, respectively. Under the existing project shareholders’ agreement, each of the other two joint venture partners has the right to purchase its proportionate share of the interest to be sold by another of the present owners. Depending on whether Dubal and Mubadala exercise or waive this right, Global Alumina’s ownership interest in the project will increase from its current 33.3 per cent to a level somewhere between 50 per cent and 66.7 per cent.

Global Alumina’s chairman Karim L. Karjian told Dow Jones Newswires today that the company wants half of the project, rather than a majority stake: “I hope Dubal and Mubadala will exercise their rights. We believe they’re excellent partners and we believe that together we can build this project into a state-of-the-art refinery. I want [Global Alumina] to have 50 per cent of the project, and Dubal and Mubadala to have 50 per cent,” he said.

**Guinea Alumina Deal Terms**
!m[Joint-Venture Partner Global Alumina Agrees to Purchase BHP’s One-Third Stake in Guinea-Based Project](/uploads/story/706/thumbs/pic1_inline.png)The terms of the deal for BHP’s one-third stake of Guinea Alumina project have not been fully clarified yet. So far, the companies have announced that Global Alumina will pay the undisclosed sum for the purchase in cash and reimburse the Anglo-Australian miner for funding costs incurred from the date the transaction agreement was signed until its closing. The Canadian company will also waive a $20 million payment owed to it by BHP. Mr Karjian said that Global Alumina will raise the necessary funds by issuing preferred shares.

**BHP’s Move Away from Aluminium**
This year, BHP has intensified its efforts to protect its balance sheet and streamline operations, as prices for industrial minerals have fallen dramatically on slowing demand in key consuming industries. The Anglo-Australian mining company has postponed and shelved a number of expansion projects, shut unprofitable mines and exited businesses that do not fit with its strategy of running large, low-cost mining and petroleum operations that are largely members of the Organisation for Economic Cooperation and Development.

In a sign of its continuing effort to optimise its business operations, in June this year, BHP first announced that it was considering selling its one-third stake in the Guinea Alumina project. The decision has been triggered by some recent hurdles in the industrial mineral market. With aluminium prices having come under increased pressure, BHP’s resolution is to concentrate its long-term focus on high-margin commodities such as iron ore and coking coal, rather than commodities with narrower margins, such as aluminium.


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