Vinacomin Expects to Start Bauxite Production as Prices Rise

By Beth Thomas

Sept. 7 (Bloomberg) -- Vietnam National Coal-Mineral Industries Group, the state-owned mining company developing the world’s third-largest bauxite reserves, may start production next year to take advantage of Chinese demand for aluminum.

The mine, in Tan Rai, Lam Dong province in central Vietnam, may start output as early as August 2010, and produce 650,000 tons of alumina annually by late 2011, Duong Van Hoa, vice president of Vinacomin, said in an interview in Buon Ma Thuot in Vietnam’s Central Highlands. Bauxite is refined into alumina, which is then smelted into aluminum metal.

Vietnam is positioning itself for an increase in demand for aluminum as the global economy recovers. China’s consumption of the metal will rise 4 percent this year because of its economic stimulus plan, Alcoa Inc., the world’s third-largest aluminum maker, said last week.

“We expect prices to rise a lot by the time we start exporting alumina, since prices of metals are all on an uptrend at the moment,” Hoa said on Sept. 5 on the sidelines of a conference to promote investment to the Central Highlands region bordering Laos and Cambodia.

Aluminum for delivery in three months fell 0.2 percent to $1,850 a ton on Sept. 4 on the London Metal Exchange. The metal closed at a 13-month high of $2,070 on Aug. 5.

Vietnam is pressing ahead with plans to develop mines in the Central Highlands amid criticism from war hero Vo Nguyen Giap about destruction to the environment and the livelihood of ethnic minorities.

“The exploitation will have very serious environmental, social, and national defense and security consequences,” General Giap said in an April letter to Prime Minister Nguyen Tan Dung. In another letter the following month to the premier, Giap said he asked for a suspension of the projects.

‘Dramatically Expand’

Aluminum Corp. of China Ltd., the country’s largest producer, signed a $1.5 billion agreement with Vinacomin in November 2006 to develop a second mine in Nhan Co, Dak Nong province on the Cambodia border. Alcoa agreed in June 2008 to work with Vinacomin to develop the aluminum industry, according to a statement from the New York-based company.

The mine in Dak Nong will produce about 1.6 million tons of refined ore, equivalent to the Lam Dong project, by the end of 2012, Hoa said. Tan Rai is 190 kilometers (118 miles) northeast of Ho Chi Minh City.

“The venture appears to be part of a larger Vietnamese government plan to dramatically expand the exploitation of the Highlands’ bauxite reserves,” the U.S. Congressional Research Service said in a July 29 report.

Vietnam has 5.4 billion tons of bauxite reserves, according to a U.S. Geological Survey report published in July. The South- East Asian nation’s reserves are the world’s largest after Guinea and Australia, the report said.

China, Middle East

Vietnam expects to export alumina to China and the Middle East, Vinacomin’s Hoa said.

“China is back,” and will propel demand for aluminum, Alcoa Chief Executive Officer Klaus Kleinfeld said in an interview last week. Alcoa, the biggest U.S. mining producer, expects demand from China to slow the decline in global aluminum demand this year to 5.5 percent, from 7 percent previously, Kleinfeld said.

To contact the reporter on this story: Beth Thomas in Buon Ma Thuot, Central Highlands, at bthomas1@bloomberg.net