Glencore agrees to buy equity stakes in Alunorte, ready to pay $700 million to Hydro

Norsk Hydro said on Thursday that it would sell a 30 per cent share in Brazilian alumina refinery Alunorte and a 5 per cent investment in bauxite producer Mineracao Rio do Norte to Swiss miner and trader Glencore. However, in a recent update, Glencore plans to pay about $700 million for the equity interests upon the conclusion of the agreement in the second half of 2023, according to a separate statement, which will provide the miner and dealer with a proportional offtake of the metal.

"The growing decarbonisation trend is driving demand not only for the mass production of batteries that require the raw materials which Glencore produces but also for primary aluminium as a strong, lightweight manufacturing metal," said Robin Scheiner, head of alumina and aluminium at Glencore.

As per the firms, the transaction value is based on a total net enterprise value of $1.11 billion, which will be adjusted for net debt of approximately $335 million. The agreement includes certain post-closing adjustments.

CEO Hilde Merete Aasheim said Norsk Hydro would utilise the deal profits for strategic expansion and shareholder distribution. A surge in mining sector acquisition bids is fueled by rising demand for metals required for the green energy transition. The Alunorte refinery, the biggest of its type outside of China, converts mined bauxite into alumina, the primary element needed to produce aluminium at smelters.

The project can generate up to 6.3 million tonnes of alumina per year. Hydro chose last year to spend 1.3 billion Brazilian reais ($258 million) in the refinery to replace heavy fuel oil with natural gas, hoping to reduce its yearly CO2 emissions by 700,000 tonnes. The fuel swap should be completed by the second part of this year. Following the transactions, Hydro will own 62 per cent of Alunorte, Glencore 30 per cent, and the remaining four minority shareholders will own 8 per cent.