Jamalco's 100% stake acquisition would have been risky: Nigel Clarke

Dr Nigel Clarke, the Minister of Finance and Public Service, insists that it would not have been economically viable for the Jamaican government to take over the responsibility of 100 per cent operations of Jamalco, the bauxite mining and alumina refining company, after the previous majority shareholder, Noble Holdings, sold its 55 per cent stake in the company for US$ 1 following it went into financial stress.

While responding to questions raised by Phillip Paulwell, the Opposition Spokesman on Energy and Mining, during the sitting of the House of Representatives in May, said that while the government considered an entire investment in the company rather than its 45 per cent stake, it would have been too risky.

He said, "We would have looked at that as a possibility. However, with our vision for this asset, for its long-term viability, it is necessary to make the capital investment that will be required to get there. The Government's view would have been that if we could find someone willing to make that investment alongside us, it would be less risky for the people of Jamaica, meaning to make 45 per cent of that investment instead of a hundred if we had infinite resources. The decision may have been different."

Clarke said, "Given the fact that it would take resources to improve the plant's operations and we're suitable for our 45 per cent, noting that the Government decided on getting a partner who can bring international expertise, know-how, and the capital required to put it on a long-term sustainable footing."

"With the new majority holder, United States-based Century Aluminum, the plan is not simply now to restore the plant to where it was before the fire but to go a little bit further to put Jamalco in a position that it can be in the upper half top two quartiles in terms of efficiency for the production of alumina."

“To get there will require some investments for us to be able to improve operational efficiency that surpasses where it was at the time of the fire,” he added.

In light of Jamaica's available financial options, he contended that the nation would fare better with a partner. He said, "In the financial position to be able to make those investments alongside us, rather than being in a position where we, the government, have to make the entirety of investment required to get to that position."

Pauwell questioned the minister, asking if it would not have been better for the government to match the price or add 50 cents to take over Jamalco's activities for US$1.50.

He queried, "I would buy the argument only that the announcement by the new partner, Century Aluminium, will take them an investment of US$20 million to secure a positive cash flow this year. Would that not be a better consideration for the government to take on that additional cost and to see a positive cash flow returning and then make the attractiveness of the incorporated status that much better?"

Reiterating that it is a matter of risk and reward, Clarke argued that the Jamaican government shouldn't have entered that line of work in the first place.

Clarke said, "So to double down and go from 45 per cent ownership to 100 - if it did not require additional investment, if it were the case that you could acquire it and get to that enhanced state of efficiency without any additional capital, so there's no sort of additional risk, it would maybe be a no-brainer to do as you are sort of intimating, but given the fact that it would absorb more capital to do so."

 The Government of Jamaica and the people of Jamaica are in a better position to share the risk and the reward by maintaining our position at 45 per cent and having to sit alongside us a multinational enterprise that has experience in Jamaica, has operated in Jamaica before, has integrated facilities, and with whom we are very aligned as to the strategic direction of Jamalco."