Essay on Project: South African Aluminum

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REV: MARCH 11, 2002

KENNETH S. CORTS

Aluminum Smelting in South Africa: Alusaf's
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 smelter 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
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Since that merger, Gencor had been a diversified financial, mining and industrial conglomerate. In May 1993,
Gencor announced it was spinning off its financial and industrial interests in order to refocus on its mining, metals, and minerals businesses. In addition to Alusaf, the companies retained in the
“unbundled” Gencor included the world’s third-largest gold producer, the world’s second-largest platinum producer, the world’s largest producer of ferroalloys, and the world’s largest supplier of titanium dioxide feedstock. Basic financial results for Gencor are given in Table A.
Table A

Gencor Financial Results

(US$ millions)

1993

1992

Net income

$ 258

$ 379

Total assets

3,766

4,439

Cash
Shareholders’ equity
Long-term debt

327
3,404
69

723
3,971
177

A number of companies besides Alusaf participated in the South African aluminum industry either as scrap recyclers or as fabricators. The production of secondary aluminum had held relatively steady at about 30,000 tpy since 1980. Together with primary production, this brought total domestic production to about 200,000 tpy (see Exhibit 1).
In 1994, semifabrication in South Africa remained primarily focused on domestic demand. South
African aluminum exports totaled approximately 100,000 tpy, of which 20,000 tpy were semifabricated products and 80,000 tpy were

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