ALCOA'S BID FOR VALCO

UNCLAS ACCRA 002527

SIPDIS

SENSITIVE

DEPT PLEASE PASS COMMERCE RASHIDA PETERSEN
TREASURY FOR ALEX SEVERENS
OPIC FOR CONAL DUFFY

E.O. 12958: N/A
TAGS: ECON EINV EMIN ENRG GH EXIM OPIC
SUBJECT: ALCOA'S BID FOR VALCO



1. (SBU) Summary. EconOffs met with Randy Phillips and Jeff
Heeter of Alcoa December 14. Phillips and Heeter were in
Ghana to follow up on Alcoa's proposal to purchase a larger
stake in the Volta Aluminum Company(VALCO) and develop
Ghana's bauxite reserves. The proposal also includes the
construction of an alumina refinery adjacent to VALCO.
Alcoa, which currently owns 10 percent of VALCO, also
submitted a proposal to restart a portion of the VALCO
smelter as soon as January. BHP Billiton (U.K.),RusAl
(Russia),and Alcan (Canada) have also submitted bids.
Phillips and Heeter expressed frustration with the process
and its lack of transparency. Alcoa submitted a draft MOU in
August, but has received minimal feedback from the
International Aluminum Industry Committee set up to review
the bids. GoG sources claim Alcoa's bid has the support of
President Kufuor. End Summary.


2. (SBU) Dr. Charles Mensa, who chairs the review committee,
met with Econ Officers December 26. He thinks Alcoa's
proposal is the strongest and has the support of President
Kufuor. Phillips and Heeter met the President before leaving
for New York, and, according to Mensa, made a good
impression. He said a decision could come as soon as
January, but warned that some ministers favored the proposals
from Alcoa's competitors. Moses Asaga, former Deputy Finance
Minister and current ranking opposition MP on the Finance
Committee, confirmed in a meeting with EconChief. The
Minister of Finance Osafo-Maafo told Asaga that several
members of the Cabinet oppose the President's preference for
Alcoa.


3. (SBU) Phillips and Heeter said initial tests showed the
bauxite in Ghana to be of good quality and of sufficient
quantity to be mined profitably. The set up, with mine,
refinery power and smelter is also attractive and fits in
with Alcoa's preferred method of operation. They stressed,
however, that all of the MOU's submitted propose to study the
feasibility of bauxite mining and refining over the next 12
to 18 months. According to Mensa, the GoG sees this as a
formality and fully expects the mine and refinery to be
built. Mensa also said Alcoa breathed new life into its
chances by bringing Phillips on board. During his meeting
with President Kufuor December 16, Phillips made a personal
impression on the President that helped erase the negative
one created by his predecessor's handling of a similar
meeting last year. Mensa went on to say that Alcoa still
needed to improve its bid to stay competitive, but had no
specific suggestions. Phillips complained that he had
similar conversations with Mensa, and wondered aloud about
the transparency of the process and Mensa's motivations.

COMMENT
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4. (SBU) Mensa's nebulous responses to Alcoa's questions may
indicate the GoG's desire to improve its position by playing
the various bids off against each other. The GoG intends to
keep a significant equity stake in any deal to ensure the
bauxite is mined. According to Mensa the GoG will not grant
mining concessions for the same reason. Despite Alcoa's
obvious enthusiasm, the foundation for a dispute may have
been laid if the company decides the mine and refinery are
unfeasible and still tries to hang on to any increased
interest in VALCO No matter who wins the bid, the USD 1
billion-plus investment needed to bring Ghana's bauxite to
VALCO would be the largest ever in Ghana. End Comment.
YATES