RIYADH State-run Saudi Arabian Mining Co (Maaden) and U.S. aluminum giant Alcoa agreed on Sunday to build a $10.8 billion aluminum complex in the world's top oil exporter, targeting the Middle East from 2013.
Under the deal, the companies form a joint venture to set up a 1.8 million ton-per-year refinery, a 740,000 ton-per-year smelter, a bauxite mine with an annual capacity of 4 million tons and a rolling mill with a capacity of up to 460,000 tons.
The firms have yet to raise the financing for the complex mainly planned to be built in Ras Azzour on the kingdom's Gulf Coast close to Maaden's phosphate fertilizer plants.
"We will go for financing during 2010," said Maaden Chief Executive Abdullah al-Dabbagh.
Last December, Rio Tinto Alcan abandoned its 49 percent stake in a 740,000 ton-per-year smelter project because it was unable to obtain financing due to the global financial crisis. The project was then budgeted at $8 billion.
The smelter and mill are slated to start production in 2013 while the refinery and mine would come online in 2014, Dabbagh told reporters in the Saudi capital Riyadh.
The project aims at "making Saudi Arabia and the Middle East a major hub for aluminum production and its downstream industries," Dabbagh added.
NO FUNDING YET
Alcoa Chief Executive Klaus Kleinfeld told Reuters the costs of $10.8 billion would be split, with the U.S. firm and its partners paying 40 percent while Maaden is to handle 60 percent.
He said a variety of funding options were being considered, when asked whether Alcoa could conduct a capital hike or go for debt.
Plans call for the expansion of the mill to 460,000 tons of aluminum sheets, ends and tabs stocks for the manufacturing of aluminum cans, the firms said.
Development will take place in two phases, starting with the smelter and rolling mill to be followed by the mine and refinery, Dabbagh said during a signing ceremony.
For the alumina refinery, Maaden has received four bids for a $1 billion engineering, procurement and construction management contract, industry sources said earlier this month.
U.S. Fluor Corp teamed up with Worley Parsons and Canada's SNC-Lavalin Group Inc joined forces with Hatch to submit proposals. France's Technip and U.S. Bechtel bid individually.
Maaden is investing about 60 billion riyals ($16 billion) to develop the kingdom's phosphate, bauxite, gold and industrial minerals and help reduce reliance on oil.
A phosphate and fertilizer joint venture with Saudi Basic Industries Corp (SABIC) is due online in 2011.
($1=3.750 Saudi riyals)
(Additional reporting by Reem Shamseddine in Khobar; editing by John Stonestreet and Matthew Lewis)