September 6, 2018 / 7:31 AM / 2 months ago

UPDATE 2-Norsk Hydro signs Brazil deals aiming to resume full output

* Says deals step toward return to full output

* No timeline on return to full production

* Says would take a month to hit output target

* Shares up 4.5 pct (Adds interview with Hydro executive, updates share)

By Melanie Burton and Barbara Lewis

Sept 6 (Reuters) - Norwegian aluminium maker Norsk Hydro has signed two deals with Brazilian authorities in a move that could help it resume full output at its Brazil’s Alunorte, the world’s largest alumina refinery.

Hydro was ordered by Brazilian regulators in February to slash output by half at the refinery after the company admitted to making unlicensed emissions of untreated water during severe rains.

Its deals with authorities include payments for food cards for nearby families and investments for the social development of local communities, as well as technical improvements, the company said in a statement on Thursday.

Hydro considers “the agreements as an important step towards resuming operations and preserving jobs for Alunorte,” it said in a statement.

It said however that no timeline for resuming full output was included in the deals signed with federal and state prosecutors as well as the state government and environmental authority.

The executive that led the negotiations with Brazilian authorities told Reuters the company’s efforts would now focus on securing the go-ahead to resume full output.

Alunorte agreed to pay combined investments, costs and fines estimated at 160 million real ($39 million) on top of an ongoing investment in Alunorte’s water treatment system.

The plant will also give a financial guarantee of 250 million real to ensure fulfilment of the agreement.

Hydro’s shares were up 4.5 percent in Oslo at 0800 GMT, making them the best performer on the Oslo benchmark index .

Brazilian authorities could not be reached for comment.

In July prosecutors in the state of Para, where the plant is located, said environmental and social deals with Hydro were under consideration.

Hydro’s production cut triggered cutbacks at its nearby Albras aluminium plant and a scramble by customers for supplies.

The company has denied many parts of prosecutors’ allegations and argued that there was no evidence of a lasting environmental effect.

“Obviously getting a restart is an arduous task,” said analyst Daniel Hynes of ANZ bank in Sydney. “If the pot lines have been let to go cold, the time to restart would be months, not weeks or days, so the impact to the physical market would be a 2019 issue.”

Hydro spokesman Halvor Molland said a restart, when permitted, could go significantly faster.

“From when we get the go-ahead to restart, it will take a month before we are in full production,” Molland said.

Hynes said however, that the news may alleviate some concerns about a prolonged period of tight alumina supply.

Those concerns have been exacerbated by U.S. sanctions on Russian aluminium maker Rusal.

Alumina prices have jumped by 40 percent since the end of June to around $640 a tonne.

Alunorte transforms bauxite to alumina, which is turned into aluminium at huge smelters. Founded in 1995, Alunorte produces 5.8 million tonnes of alumina a year, according to the company website.

($1 = 4.1435 reais)

Reporting by Alexandra Alper in Sao Paulo, Melanie Burton in Melbourne, Barbara Lewis in London and Ole Petter Skonnord in Oslo; editing by Lisa Shumaker and Jason Neely

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