Glencore will acquire 30% of Hydro’s Brazilian alumina refinery Hydro Alunorte and Hydro’s 5% ownership in the Brazilian bauxite producer Mineracão Rio do Norte (MRN). MRN is Brazil’s largest bauxite producer.

Glencore will also acquire an additional 40% stake in MRN, which is currently owned by Vale. This 40% 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% of Alunorte’s long-term bauxite requirements from MRN.

Hydro Alunorte

Hydro Alunorte is the largest alumina refinery outside China and is located in the city of Barcarena, state of Pará. The alumina is the raw material for aluminum and is produced from bauxite, through the Bayer process.

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.

MRN has annual production capacity of c. 12.5 million metric tons of bauxite. The open cut strip mining operation is located in the district of Porto Trombetas, western Pará State, with operations covering the municipalities of Oriximiná and Terra Santa, in the Brazilian Amazon. The mine is within the borders of the national forest of Saracá-Taquera which is a part of the Amazon rain forest.

MRN started production in 1979. Before starting extraction of bauxite, the existing vegetation is cleared. The bauxite is stripped off, with the overburden excavated and dumped into the adjacent strip from which ore was previously mined.

The ore is transported to a crushing plant, and then onto washing cycling and filtering facilities. Once beneficiated, the ore is transported by rail to the port 28 km away. Reforestation starts as soon as a mining area is closed.

MRN has used in total 450 different plant species in the rehabilitation program, which began in 1984. Today, around 120 different species are commonly used.

Mining in Brazil’s Amazon forest. Left: distribution of mining leases and forests in 2015. Right: case study mining operations. Mining leases are shown as white polygons overlying Landsat imagery for 1985 and 2015. Landsat pixel-based cloud-free mosaic, bands 3, 2, 1. Green areas indicate forests, bright white areas indicate non-forested ground, and blue areas are water. Figure from Sonter et al. (2017).

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%. The remaining 55% shall be owned by South 32, Rio Tinto and CBA.

The transactions will have a total net enterprise value of US$1.11 billion, which will be adjusted for Alunorte’s net debt as of 30 June 2023. Net debt for 30% of Alunorte as of 31 March 2023, was US$335 million. The enterprise value and net debt exclude asset retirement obligations of US$40 million on a 30% 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 30 June 2023. Subject to Alunorte’s performance, Hydro may make certain repayments to Glencore which are capped at US$55 million.

The transactions are subject to customary regulatory approvals. Closing of both transactions is expected in the second half of 2023.

After the transactions, Hydro will remain the largest shareholder of Alunorte with 62% ownership. Glencore will own 30% of Alunorte, while the remaining four minority shareholders shall collectively own 8%.

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 aluminum smelter portfolio.

—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.

—Hilde Merete 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 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.

Resources

• Sonter, L.J., Herrera, D., Barrett, D.J. et al. (2017) “Mining drives extensive deforestation in the Brazilian Amazon.” Nat Commun 8, 1013 doi: 10.1038/s41467-017-00557-w (open access)