Rusal closes deal to buy 30% in Chinese alumina producer HWNM
Moscow. August 29. INTERFAX.RU – Rusal paid $264 million for 30% in the capital of Chinese alumina producer Hebei Wenfeng New Materials Co. (HWNM), according to the annual report of the Russian company.
The transfer of rights to the share occurred in April 2024, but the purchase price may still change within a year from the date of the transaction.
Earlier, Rusal reported that the purchase price of the stake in HWNM would be about $267 million, but could be adjusted depending on the size of HWNM’s working capital and debt at the time of closing. In any case, the price should not exceed 2.5 billion yuan (about $349.2 million).
Rusal entered into several put and call options with the seller to protect its interests, the report says.
Rusal agreed to buy 30% of the Chinese company in October last year and made an advance payment of $13 million.
The deal will provide the company with access to competitively priced alumina supplies, Rusal explained. Completion of the deal is subject to Chinese government approval, corporate actions, and the consent of HWNM’s creditors. Rusal and Hebei Wenfeng Industrial Group Co., which controls HWNM, will enter into a shareholders’ agreement.
HWNM owns an alumina refinery in Hebei Province with a capacity of 4.8 million tons of metallurgical alumina. Rusal will receive a share in the refinery’s production in proportion to its share in the capital. Thus, the Russian company can lay claim to approximately 1.4 million tons of alumina per year. For comparison, Russia’s annual alumina import volume is about 4.3 million tons.
In 2022, Rusal lost access to the Nikolaev Alumina Refinery and alumina supplies from Australia – these sources together accounted for about 40% of alumina consumption. Alumina supplies from Ireland, where Rusal’s Aughinish alumina refinery is located, are also limited.
Rusal restored alumina supplies through purchases on external markets, which could maintain production continuity without losses, but led to an increase in costs, the company said in a press release following the results of the 2023 IFRS report.
In an effort to meet raw material needs and reduce costs, Rusal announced in 2023 the construction of a new alumina refinery in the Leningrad Region, the first stage of which is planned to have a capacity of up to 2.4 million tons per year. Rusal plans to import bauxite from its enterprises in Guinea to this plant.
Rusal’s share in HWNM production roughly coincides with the estimated volumes of alumina that Rusal purchases on the market (around 1.4 million tons), meaning that the purchase of a stake in the Chinese enterprise could fully cover the needs of the Russian company, explained independent industrial expert Maxim Shaposhnikov.