Hydro and Glencore to partners in developing Alunorte
Hydro has signed an agreement with Glencore, who will acquire 30 percent of the Brazilian alumina refinery Hydro Alunorte and Hydro’s 5 percent ownership in the Brazilian bauxite producer Mineracão Rio do Norte (MRN).
Glencore will acquire an additional 40 percent stake in MRN, which is currently owned by Vale. This 40 percent interest will be acquired by Hydro from Vale and immediately sold to Glencore on a back-to-back basis. After the transactions, Hydro will no longer have an ownership position in MRN.
The bauxite agreement between Vale and Hydro will be terminated and, following the transactions, Glencore will continue to supply approximately 30 percent of Alunorte’s long-term bauxite requirements from MRN.
“This transaction is an important step to deliver on Hydro’s strategy. Proceeds from the transaction will be used for strategic growth and for shareholder distribution. Alunorte remains a core strategic asset for Hydro and is a key source of low-carbon alumina supply to our primary aluminum smelters. Hydro will continue to be long alumina, but now more balanced in relation to the demand from our aluminium smelter portfolio,” says President and CEO of Hydro, Hilde Merete Aasheim.
Hydro’s 2025 strategy, launched in 2020, outlined a clear ambition to lift profitability and drive sustainability throughout the whole company. Part of the strategy has been to develop Alunorte, allocating capital to sustain and improve operations, and continue efforts to strengthen the refinery’s first quartile cost and carbon position as well as increasing community engagement.
“Our Bauxite and Alumina business area has made significant progress over the last years to bring down the footprint of producing alumina, which enables Hydro to strengthen our position in low-carbon aluminium. We look forward to becoming partners with Glencore, and their broad industrial experience within metals and mining, to further develop Alunorte,” says Aasheim.
Hydro and Glencore will continue efforts to reduce carbon emissions from Alunorte through the fuel switch project that aims to substitute fuel oil with LNG, and the electrification of the coal boilers, bringing Alunorte to the first decile on the global carbon curve already in 2025, thereby positioning Alunorte as a leading supplier of low-carbon alumina. In addition to the decarbonization of Alunorte, the partners are committed to continuing the development of social projects to improve the lives and livelihoods of nearby communities.
The transactions will have a total net enterprise value of USD 1.11 billion, which will be adjusted for Alunorte’s net debt as of June 30, 2023. Net debt for 30 percent of Alunorte as of March 31, 2023, was USD 335 million. The enterprise value and net debt exclude asset retirement obligations of USD 40 million on a 30 percent basis.
The parties have also agreed to a post-closing price adjustment based on financial performance of Alunorte over a period of 21 months from June 30, 2023. Subject to Alunorte’s performance, Hydro may make certain repayments to Glencore which are capped at USD 55 million.
The transactions are subject to customary regulatory approvals. Closing of both transactions is expected in the second half of 2023.
Additional information related to the distribution of the proceeds will be provided on closing of the transaction.
After the transactions, Hydro will remain the largest shareholder of Alunorte with 62 percent ownership. Glencore will own 30 percent of Alunorte, while the remaining four minority shareholders shall collectively own 8 percent.
Alunorte will continue to be consolidated in Hydro’s financial accounts. There will be no remeasurement or recognized gain related to this transaction.
Alunorte alumina refinery has an annual nameplate capacity of 6.3 million tonnes of alumina and is a key raw material source for Hydro’s smelter operations, including the adjacent Albras smelter, Norwegian primary aluminium smelters, and external customers. The transaction will have no impact on the physical supply contracts or cost to Hydro Aluminium Metal.
Bauxite from MRN supplies one third of Alunorte’s bauxite needs, while the remaining share is supplied from Hydro’s fully owned Paragominas bauxite mine. Following the transaction, MRN will continue to be independently operated with Glencore as the largest shareholder owning 45 percent. The remaining 55 percent shall be owned by South 32, Rio Tinto and CBA.
