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Rusal to become strategic partner, exclusive supplier to US' Braidy Atlas Kentucky aluminum mill

New York — Russia's Rusal, the world's second largest producer of primary aluminum, and US-based Braidy Industries have signed a letter of intent, which will make Rusal a strategic partner in Ashland, Kentucky's Braidy Atlas aluminum mill, with Rusal investing up to $200 million, the two companies said Sunday.

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The $200 million letter of intent is viewed as the "strategic, cornerstone investment that paves the way for the nearly $1.7 billion total investment," Rusal and Braidy executives said.

Rusal and Braidy also have negotiated an exclusive 10-year supply contract under which Rusal will supply aluminum slab and P1020 to the Kentucky mill, officials told S&P Global Platts. That contract's estimated value would be "approximately $500 million per year at today's [primary aluminum] prices," Braidy CEO Craig Bouchard said.

"We are very fortunate to have the best smelting company in the world join us as our partner and as our lead, exclusive supplier," Bouchard added, continuing, "No other company could have supplied us with the low-carbon slab, prime aluminum contract that we've negotiated."

Bouchard maintains that the partnership has three pillars -- low-cost, high-quality, low carbon. The mill will be the low-cost producer of aluminum sheet; but it also aims to produce the highest quality product from Rusal's low-carbon primary aluminum. The operation's furnaces might be fed by 50% prime aluminum and 50% scrap -- as opposed to the more typical practice of a 70:30 scrap-to-prime ratio, according to Bouchard.

SOON TO DEBUT: BRAIDY ATLAS RUSAL

With full production planned for 2021, the nearly $1.7 billion Braidy Atlas mill is the first greenfield aluminum rolling mill being built in the US in more than 35 years. Its hot mill output is estimated at 500,000 mt/year and finished sheet at 300,000 mt/year.

Bouchard is quick to acknowledge that Braidy Industries "is in the lead at the rebuild of Appalachia. It's a very important social responsibility, we take it very seriously and we only want the best partners in the world to help us."

Bouchard said that what's now known as the Braidy Atlas mill ultimately will be referred to as Braidy Atlas Rusal. The two boards are expected to consider the letter of intent next month, followed by four to eight weeks of contractual work. The documentation process will likely be completed by early summer.

In a factsheet handout, Braidy Industries, the parent company notes that it is seeking $500 million in total capital, has more than 560 investors, more than 100 institutional funds and accredited investors, $1 billion "substantial indications of interest," and $45 million in cash on-hand with zero debt.

"Today marks the first step in a long-term relationship between our groups focused on creating real value in the emerging low-carbon economy," Lord Barker, executive chairman of EN+, Rusal's parent company, told Platts. "This is a unique opportunity -- globally -- and one that both companies are uniquely positioned to create -- lowest cost, highest quality, low-carbon -- is the future."

Barker noted how Chinese smelters generate 22 mt of carbon for every metric ton of aluminum produced, whereas Rusal's smelters generate just 3.7 mt of carbon for every mt of aluminum made.

"We are marrying lowest cost with lowest carbon, meaning that being environmentally responsible is no longer the preserve of those who can afford to pay for it, but actually becomes the right of every consumer," Barker explained one major appeal of the partnership.

'HAPPY' TO PAY THE TARIFFS: BOUCHARD

The Kentucky facility, located within a day's drive of 50% of US automotive production, will target the automotive, aerospace and industrial markets for lightweight exposed aluminum sheet.

The US Treasury recently lifted sanctions on Rusal, but having the primary producer as a long-term supply partner will still require Braidy to pay the existing 10% tariff on its aluminum imports. But the quality material Rusal delivers, according to Bouchard, is worth it.

"Happy to pay the tariffs. Absolutely," Bouchard said.

-- Joe Innace, joseph.innace@spglobal.com

-- Edited by Norazlina Jumaat, newsdesk@spglobal.com