Maaden to launch $7bn aluminium financing deal in second quarter

03 February 2010

Saudi state firm to approach banks for $7bn smelter project funding

Saudi Arabian Mining Company (Maaden) is planning to launch the financing deal for its $7bn aluminium smelter in the second quarter of 2010, according to bankers close to the project.

Maaden is developing the project in a joint venture with US aluminium company Alcoa. Riyad Bank and the UK’s Standard Chartered are acting as financial advisers on the scheme.

The project sponsors and its advisers have already started talks with two export credit agencies about funding the project. The majority of funding is likely to come from the local Public Investment Fund (PIF) and the Saudi Industrial Development Fund (SIDF), according to a Riyadh-based source close to the project.

The debt portion of the financing deal is expected to be split between a riyal and dollar tranche, and the tenor on the debt will be over 15 years.

Originally, Maaden planned a joint venture with Canada’s Alcan, which would have taken a 49 per cent stake in the project. However, the 2007 acquisition of Alcan by UK/Australian mining group Rio Tinto to form Rio Tinto Alcan left the combined company with huge debts. Coupled with the fall in commodity prices in late 2008, this left the UK/Australian group unable to finance its share of the equity in the scheme.

Rio Tinto Alcan eventually pulled out as equity partner in the project in December 2008. Alcoa, the third largest producer of aluminium in the world, agreed to replace Rio Tinto Alcan as equity partner in December 2009.

The smelter is expected to start production in 2013, while a second-stage development of a refinery and a mine will come on stream in 2014 (MEED 09:04:09).

The total aluminium development, including the refinery, mine and smelter, will cost $10.8bn to develop. The smelter will be developed in Ras al-Zour, with the bauxite mine and refinery at Zubairah, in Qassim Province in the centre of Saudi Arabia.

In December 2009, Maaden also received four bids from contractors to develop the $1bn refinery (MEED 17:12:09).

Once complete, the complex will have a refinery with capacity of 1.8 million tonnes a year (t/y), a 740,000-t/y smelter, and a 4 million-t/y bauxite mine.

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