Ord River Resources reports SARCO signs EPC contract for Laos alumina refinery

Ord River Resources (ASX: ORD) has reported that Sino Australian Resources Co., Ltd (SARCO) has entered into an agreement with China Non-Ferrous Metal Industry’s Foreign Engineering & Construction Co. Ltd (NFC) for a future engineering, procurement and construction (EPC) contract.

The Memorandum of Understanding (MoU) outlines that NFC will act as SARCO’s contractor for EPC for the planned 600,000 tonne per annum alumina refinery in Laos.

SARCO is the joint venture company owned by Ord River (49%) and NFC (51%).

NFC will charge a fixed total EPC price of US$1,000 per tonne of capacity and the total contract value will be US$600 million.

NFC will deliver the fully operational refinery to SARCO within 2 years and provide technical assistance and training after the refinery commences operation.

SARCO will be responsible for arranging funding and will be assisted by NFC, which will organise project financing from Chinese banks.

This key development for SARCO fixes competitive price and delivery time terms, providing the highest level of cost certainty.

The fixed price turnkey arrangement can effectively remove main technical risks and reduce the overall risk of the project.

SARCO is currently negotiating with financing banks who are familiar with such EPC arrangements, such as China Minsheng Banking Corporation (CMBC).

Ord River expects Chinese banks to finance SARCO at competitive interest rates in light of the EPC cost certainty.

SARCO is continuing its discussions with NFC to turn the MoU into a binding contract.

NFC is an EPC specialist firm with in-house world leading alumina refinery design, engineering, manufacturing and construction capabilities.

Impressively, the company has a track record of successful project delivery and has designed and built 60% of China’s entire alumina refinery capacity (26 million tonnes out of 43million tonnes).

In addition, NFC has preferential long term financing support from China Eximbank, China Development Bank and China Minshing Banking Corporation.

On May 26 Ord River reached a major milestone in its development as a producer with China Minsheng Banking Corporation stating in a letter of proposal to SARCO that it intends to provide the necessary project financing SARCO requires.

SARCO intends to raise up to A$200 million to finance the construction of the alumina refinery in Laos.