Brazil Alumar Refinery Incurs $45M Extra Costs In 3Q - Alcoa

Sep 15, 2010 (Dow Jones Commodities News via Comtex) -- RIO DE JANEIRO (Dow Jones) -- Aluminum producer Alcoa Inc. and trader Alcoa World Alumina and Chemicals, or AWAC, said that higher production and equipment costs at the Alumar alumina refinery in Brazil will boost costs at the joint venture by $45 million in the third quarter.

The extra costs, to be recorded in the companies' third quarter results, were due mainly to energy blackouts and a problem which occurred at Alumar's bauxite ship unloader in Aoril, causing some disruption, an Alcoa spokesman said Wednesday. Temporary equipment is being used until a permanent loader is brought into operation later this month, he said.

The refinery, located at Sao Luis in Maranhao state, northeast Brazil, is targeted to reach full capacity by year-end after a recent expansion, the spokesman said.

The refinery is ramping up to its full capacity of 3.5 million metric tons a year of alumina, a raw material for aluminum smelting, after completing in December 2009 an expansion which started in 2007. Full capacity was previously expected to be attained in first-quarter 2010.

The refinery initially had a capacity of 1.5 million tons a year.

Combined with the last year's opening of the Juruti bauxite mine in the Brazilian Amazon, expansion of the Alumar refinery represents an investment of more than $2.2 billion designed to move Alcoa to the top quartile of low-cost production, according to the company.

Alcoa manages the Alumar refinery and, together with AWAC, holds a 54% stake in the venture. The other partners in the refinery are BHP Billiton Ltd. (BHP.ASX) with 36% and Rio Tinto Alcan Ltd. (RIO.ASX) with 10%.

Alumina produced at Alumar is used in the adjacent Alumar primary aluminum smelter, which is also majority-owned by Alcoa and may also be sold to the general market according to the smelter's needs, the spokesman said.