Alcan says deal with B.C. for planned $2-billion Kitimat smelter very close

MONTREAL - Alcan Inc. says it is close to a deal with the B.C. government and B.C. Hydro which will allow the aluminum producer to proceed with a $2-billion smelter in Kitimat.

Alcan and the others "are very close to reaching an agreement," Michel Jacques, president of Alcan's primary metal group, said Thursday. He noted there was already a provision in Alcan's agreement with the province which allowed energy to be sold to the provincial utility from Alcan's existing facility in Northwestern B.C.

"We're not asking for anything new. . .this is our intent to continue operating in Kitimat with the same agreement.

"The only difference is that we would like to do so with a modern smelter," he added.

There have been discussions with officials of the District of Kitimat (DOK) which opposed Alcan's proposal to sell power from its Kemano hydroelectric project to the B.C. Hydro grid.

"The people that decide on policies, how the energy will be used, produced, distributed and priced in B.C. is not the DOK, it's the government of B.C.," Jacques added.

He said a large portion of the population "strongly supported" the project and it was Alcan's "firm intention to build a new smelter to replace a facility that is now over 50 years old."

The Kitimat modernization also includes a reduction of the workforce.

Alcan has been steadily reducing its workforce in Kitimat, currently at 1,550, down from 2,500. The upgrade would increase production but cull the employee count further to 1,000.

President Dick Evans also told the company's annual meeting aluminum supply will likely slightly exceed demand for the metal in 2007, but inventory levels are expected to remain near historical lows.

"Aluminum, although prices were up significantly, improved its competitive position compared to other metals, especially copper, creating good opportunities for aluminum substitution," Evans said.

"While prices are high by historic standards, they are likely to remain so longer, as the entire world cost curve has clearly shifted upwards significantly."

A table released by Alcan indicated global demand was expected to grow by about nine per cent in 2007, an increase of about 3.1 million tonnes.

It showed that supply of primary aluminum will increase by 10 per cent.

Evans also announced Alcan will join the United States Climate Action Partnership that is calling on the U.S. Government to quickly enact strong national legislation to achieve significant reductions in greenhouse gas emissions.

The USCAP is a coalition of leading companies and NGOs.

Evans later told reporters he "couldn't think of any government in the world that has done enough in a constructive way to get at long-term solutions."

Montreal-based Alcan has 68,000 employees in 61 countries, working in bauxite mining, alumina processing, primary metal smelting, power generation and aluminium fabrication.

The company reported Tuesday a 30 per cent increase in first-quarter profit to US$591 million from US$453 million a year ago.

Its shares fell 22 cents to close at $66.03 on the Toronto Stock Exchange on Thursday.