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RusAl Buys Plant in Nigeria

Russian Aluminum said Friday that it had signed a deal with the Nigerian government to buy a controlling 77.5 percent stake in Alscon, an aluminum plant, for $250 million.

The deal will boost RusAl's global production capacity by about 6 percent when the plant goes into full production, the company said.

"The acquisition is part of our strategy to boost aluminum production and strengthen RusAl's position as a global company," RusAl head Alexander Bulygin said Friday in a statement.

The Nigerian government holds a 7.5 percent stake and Ferrostaal, part of the German truckmaker MAN, holds 15 percent in the 193,000-ton capacity Alscon smelter.

Under the deal, RusAL adds 150,000 tons of aluminum and aluminum alloys to its existing capacity.

Included in the purchase price are a gas power-generating station and a port on the Imo River. The price also covers the cost of dredging the local riverbed to allow the passage of large 35,000-ton cargo ships, a RusAl spokeswoman said Friday.

In terms of additional investment, RusAl said it would spend, together with other shareholders, a combined $150 million to complete the last quarter of the plant's construction and modernize its facilities.

Alscon was built in 1997 but has stood idle since 2000 due to "high production costs, inadequate gas supply, and complicated marine access," RusAl said in the statement.

RusAl plans to start aluminum production at Alscon within six months, when the company's representatives will take their places on the board of the Nigerian smelter, a spokewoman said.

The plant will reach full capacity in 2007, she said. Supplies of bauxite and alumina, raw materials used to make aluminum, will come from RusAl's two mining operations in Guinea.

Alscon's management has already signed gas contracts with the Nigerian Gas Co.for supplies to its power plant, which will generate all of the plant's energy needs, the spokeswoman said.

Analysts said the Alscan purchase was relatively cheap, mainly because of Nigeria's difficult political and business climate. "In effect, RusAl paid $1,666 per ton of aluminum, which is considerably cheaper than the $2,500 per ton cost in their joint venture with SUAL in the Komi republic," said Denis Nushtayev, a metals analyst with brokerage Metropol.

"They got the discount price because of the political risks in Nigeria," he said.

The 150,000 tons RusAl will annually get from Alscon should boost the company's overall annual output by 6 percent, to 2.85 million tons, it said.

Given the current 18-year high on aluminum prices -- more than $2,500 per ton -- this is a good time to acquire and also build factories on greenfield sites, said Alexei Morozov, a metals analyst with investment bank UBS.

Last week, Bulygin said RusAL would spend $2.1 billion this year on expanding production, including $300 million on acquisitions.

Of the $2.1 billion, RusAl will spend $700 million on modernizing its existing plants, and channel up to $1 billion into greenfield construction, he said.

In the second half of this year, RusAl plans to start up its 300,000-ton smelter in the Siberian republic of Khakassia, with additional greenfield plants near Irkutsk and in Queensland, Australia, under review.

Separately, the Ukrainian government eased legislation to allow the Ukrainian Aluminum Company and the Nikolayevsky Alumina Plant, both owned by RusAl, to integrate with their parent company, RusAl said Friday.

(The Moscow Times 06.ii.06)

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