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Alusaf Hillside Project

In: Business and Management

Submitted By yvonzhang2
Words 3910
Pages 16
9 -7 0 4 -4 5 8
DECEMBER 15, 2003

KENNETH S. CORTS JOHN R. WELLS

Alusaf Hillside Project
At the beginning of 1994, Alusaf was considering building the world’s largest greenfield primary aluminum smelter, a 466,000-ton-per-year facility at Richard’s Bay, a deepwater port on the east coast of South Africa’s province of Kwa-Zulu Natal. Alusaf was the sole primary aluminum producer in South Africa, operating 170,000 tpy of capacity at the existing “Bayside” facility at Richard’s Bay. Alusaf’s 1993 revenues were $220.2 million, up 1% from 1992. Income was $8.6 million, up 122% from 1992. A feasibility study for the proposed “Hillside” smelter had been completed over the past two years. During this time, South Africa’s political regime had undergone a dramatic transformation with the 1993 passing of the Transitional Executive Council (TEC) Bill. This bill removed absolute power from the hands of whites and created a multi-racial body that would share responsibility for organizing and overseeing the general elections to be held in April 1994. Within days, Nelson Mandela, leader of the African National Congress party, addressed the UN Special Committee Against Apartheid in New York, calling on the international community to lift sanctions against South Africa. The European Union, the Organization of African Unity, Canada, China, Sweden, Singapore, India, and the United States all responded quickly with announcements that they would begin the process of restoring normal economic relations with South Africa. Aluminum prices had fallen dramatically since the feasibility study was begun, as Russian aluminum continued to flood the market. Now, with aluminum prices near their all-time low in real terms in early 1994, Alusaf had to decide whether to embark on this massive project.

The Aluminum Industry in 19941
Aluminum was a versatile metal, valuable in a wide range of...

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