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Bosai Minerals in talks to build US$1.2B bauxite refinery in Ghana

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Bosai Minerals in talks to build US$1.2B bauxite refinery in Ghana

Bosai Minerals Group Co. Ltd., a private bauxite mining company in Chongqing province, China, said it is in talks to build a US$1.2 billion refinery in Ghana on the back of a recently inked US$2 billion minerals-for-infrastructure barter deal between the two countries, according to a senior company executive.

In July, the parliament of Ghana greenlighted a deal between the country and Sinohydro Corp., under which the Chinese state-owned construction company will provide US$2 billion in infrastructure projects including roads, bridges, hospitals and housing. The deal forms part of China's Belt and Road initiative, announced in 2013, to link up trade routes across Southeast Asia, Africa, Europe and Latin America.

The Western African country will also team up with "selected private partners" to develop a bauxite refinery, the Ghanaian minister of finance said during the country's mid-year fiscal policy review. The venture will be established within the next three years with at least 30% local participation.

Ghanaian Vice President Mahamudu Bawumia in September said Ghana will pay for the infrastructure using refined bauxite and that Sinohydro would not mine or receive raw bauxite ore as payment, Ghana News Agency reported.

Zhang Yonghua, secretary to the board of Bosai, told S&P Global Market Intelligence that the company intends to invest US$1.2 billion to build a refinery in Ghana and is talks with the local government over the details of the deal. Zhang said the company is also studying how the local transportation system could serve the refinery.

Although Zhang declined to unveil the timeframe for the two parties to finalize their agreement, he said a deal would likely involve tax subsidies.

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Bosai Minerals currently produces 2 million tonnes of metallurgical-grade bauxite per year at its Ghanaian unit.

Source: Bosai Minerals Group Co., Ltd.

Wan Ling, principal consultant of aluminum with consultancy CRU, said Bosai is one of the few Chinese companies with a Ghanian presence.

Three years before China announced Belt and Road, Bosai, a Chongqing-based private company, entered the African country in 2009 by acquiring an 80% stake in the country's only producing bauxite mine Awaso from Rio Tinto for US$30 million. The company produces 2 million tonnes of metallurgical-grade bauxite per year in its Ghanaian unit, according to its website.

Helen Lau, a mining analyst with Argonaut Securities, and CRU's Wan both believe top companies like Aluminum Corp. of China Ltd., or Chalco, and China Hongqiao Group Ltd. will rely on Guinea for bauxite for the moment.

But Lau said she expects more aluminum companies to seek to acquire mineral resources in Belt and Road countries due to the significant gap between Chinese demand and domestic production.

As the country's demand for natural resources has grown, in recent years Chinese companies have increasingly relied on import of minerals from countries such as Guinea. According to statistics from China's General Administration of Customs, the country's bauxite imports amounted to 68.5 million tonnes in 2017. China's domestic bauxite output came in at 65 million tonnes during the same period.

Data also showed Guinea in 2017 was the largest exporter of bauxite to China, supplying 27.6 million tonnes. Ghana was ranked ninth and only accounted for 771,517 tonnes of bauxite imports that year.

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Chalco plans to invest a total of US$706 million at its Boffa bauxite project in Guinea. In October, Chalco broke ground at the site and the initial phase of the project is expected to produce 12 million tonnes of bauxite per year.

Another major bauxite supplier to China is SMB Winning Consortium, which is a strategic alliance formed by aluminum major China Hongqiao, Singaporean shipping firm Winning International Group and Guinea's UMS International Group. The project said on its website that it will inject about US$4 billion into Guinea through its 2017-2022 plan and increase annual production from 30 million tonnes in 2017 to 50 million tonnes from 2020.

CRU's Wan said Ghana is less attractive than Guinea as the latter country boasts stronger reserves. Ghanaian Vice President Mahamudu Bawumia in 2017 said publicly that Ghana has about 160 million tonnes of bauxite reserves while United States Geological Survey, or USGS, data showed Guinea has 7.4 billion tonnes of reserves.

There is also a gap in bauxite production between the two African countries. According to USGS statistics, in 2017 Guinea's production is estimated to be 45 million tonnes while World Bureau of Metal Statistics' estimate for Ghana is at 1.29 million tonnes.

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