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10.11.2008 Business & Finance

Parliament Approves VALCO Sale

By Daily Guide

A CONSORTIUM of international aluminium companies, comprising Brazilian mining giant, CVRD (VALE) and Norsk Hydro of Norway has been given the green-light to take over 70 percent shares of the Volta Aluminium Company (VALCO) owned by the Government of Ghana.

This followed a unanimous approval in Parliament yesterday of the sale and purchase agreement between the Government of Ghana and the international aluminium partners.

The consortium will take over 70 percent issued and fully paid shares of VALCO for US$175.5million.

The consortium will make an initial payment of an amount of US$25m within 15 working days of the execution of the agreement and upon the approval by Parliament.

This initial amount serves as an irrevocable commitment on the part of the consortium to pay the remaining amount, provided certain conditions pertaining to the agreement aremet.

The agreement stipulates among others that the outstanding amount of US$150.5m should be paid within forty-five (45) days after the VALCO smelter has commenced production with two pot lines in normal operations, the execution of the transfer of shares by the Government and the delivery of the share certificate signed by VALCO in favour of the consortium.

Government of Ghana is expected to represent and warrant to the consortium that, the company shall not be nationalized at any time in the future. In the event of such an action, the consortium would be paid an aggregated amount, being the total sum paid for the shares, plus the value of any additional shares purchased by the consortium at an interest rate of LIBOR plus 4% spread from the date of payment of the initial deposit, and acquisition of each additional share (s) to the date of nationalization.

The joint committees on Finance and Economic Planning, and Trade, Industry and Tourism were grateful to the President of Brazil, Lula Da Silva and the government of Norway for playing key roles in bringing this Agreement to fruition.

Before the approval of the Agreement, the Deputy Minority Chief Whip, Hon. E. T. Mensah urged the House to unanimously approve the deal which he described as a good one that will further enhance the South-South cooperation between Ghana and Brazil, abandoning an earlier opposition to the deal by the Minority in Parliament.

He emphasised that the deal will help Ghana to achieve its dream of mining and refining the rich bauxite deposits in the country for processing into aluminium metal and alloys.   

CVRD (VALE) is the second largest mining company in the world and the largest producer of iron ore with an asset base of US$165 billion whilst Norsk Hydro Aluminium Company of Norway is the second largest integrated aluminium company in Europe.

The sale of the majority shares in VALCO is seen as the first practical step to partnering the Ghanaian Government in developing an integrated aluminium industry in Ghana over a period of approximately six years.

This will help propel the country into an industrialized nation as was envisaged 47 years ago by the first President of Ghana. The estimated cost of the whole integrated process will be about US$4.70 billion.

The Agreement will generate immense socio-economic benefits to the nation some of which include the development of an integrated aluminium industry in the country, an investment with an estimated cost of US$4.7b.

The breakdown is as follows:

Mining of Bauxite at Kibi and Nyinahin - $500m

ii. Development of a two-million tonne aluminium refinery plant at Tema    -$2,500m

iii. Refurbishment of the rail line from Kumasi to Tema - $500m

iv. 1200 megawatts power plant in Tema to be known as the Chemu Power -$1,200m

The production capacity of VALCO is also expected to be expanded to be the largest aluminium smelter in Africa with export earnings over US$1.6billion annually.

The successful start of the project will provide employment opportunities to Ghanaians. The project is estimated to generate about 9700 direct jobs 42,000 indirect jobs.

This would help reduce unemployment and its attendant social vices. It is also expected to lead to the creation of many cottage industries which will create wealth and alleviate poverty.

Again, the refurbishment of the 254 km rail line from Kumasi to Tema would not only help transport bauxite ore from the mines to the smelter for processing, but will also help alleviate the pressure on the road network, reduce the cost of hauling goods to and from the Northern parts of Ghana and make the accessibility to Boankra inland port a reality.

The Refinery is also expected to revamp the local salt industry by utilizing local salt from Ada, Denu and Saltpond to fulfill an annual requirement of 125,000 tonnes of caustic soda. It will also trigger the establishment of lime manufacturing plants which is also expected to fulfill the requirement of 42,000 tonnes of lime annually.

By Awudu Mahama