Mining Minister highlights US$500,000 loss per day at Jamalco refinery for fire breakout; Critical assets also at stake

Mining Minister Robert Montage informed the House of Representatives that the August 22 fire breakout in the Jamalco alumina refinery has caused the company lose US$500,000 per day. This is based on the production cost of US$150 per tonnes of alumina at a production rate of 3,170 tonnes everyday. He also revealed that the situation in Jamalco is highly critical, interrupting the alumina production there.

Montage informed that Jamalco has property and plant insurance of US$250 million that covers single incidents like fire.

“In addition to property damage, the insurance policy covers extra expenses and business interruption,” says Robert Montage.

He told the House that important assets like the two control rooms, powerhouse, fuel oil pump station, turbine generator control equipment, two turbine generators, and other equipment were damaged due to the fire breakout. 

Mr. Montage stated that Jamalco has claimed US$150 million for business interruption which is expected to cover the monthly expenses for 10 months out of the 18 month period of care and maintenance of the property.

“This will have a very negative impact on the company and the wider economy. There will be a decline in alumina production and the related foreign exchange earnings for 2021, into 2022 and possibly into 2023. This is already having a direct effect on the finances of Clarendon Alumina Production Limited (CAP), as the company will not earn any income until alumina production resumes,” stated Robert Montage.

“I am, therefore, heartened to advise that the insurers are to release an advance payment of US$25 million to Jamalco,” says Montage.

Due to the huge losses suffered, Jamalco has informed its suppliers like the New Fortress energy that until the further notice they won’t be picking up any new invoices or products.

Montague stated that apart from the financial aid, the workers, contractors, suppliers and stakeholders of Jamalco , “ are also feeling the heat from the devastating event.” He highlighted that in order for the refinery to function effectively, they will need working capital, which will also help in running other activities like land rehabilitation.

Jamalco on the other hand is making every effort to keep their staffs, including both the direct and contractual employees. As of now, the mining contractors are working three days every week while the work of the mothballing contractors is coming to an end. The work of the residue storage area contractors for dyke repair is also expected to begin within the coming months.

According to Robert Montage, Jamalco is expected to begin a three-stage-resumption model that will provide the stakeholders with better results.

“It will increase the speed with which the company’s employees and contractors are returned to full-time employment and provide the company with the income it needs to once again make a significant contribution to the lives of the people of central Jamaica and the wider economy,” says Montage.

Stage one will help the alumina refinery to get back into action as the single digester operation using the existing infrastructure. The amount required for this stage is estimated to be around US$19 million and is expected to begin the construction by June 2022. This will help in restarting the alumina production by 50 percent of the plant’s capacity.

Under stage two, the plant is expected to shift to the two digester operation. The main aim is to reduce the dependency on the Jamaica Public Service Company and enhance plant reliability by using the rental gas turbines. However, the cost for the operation is yet to be decided and is expected to be completed within 9 months of stage one.

Stage three, also known as the long-term solution for Jamalco will improve the efficiency of the refinery. Under this stage, the rented boilers will be replaced by new gas-fired powerhouse.

 According to Montage, “Extensive option analysis is required to determine whether it should be Jamalco-owned or should be an outsourced power plant. The cost of this stage is to be determined. “It is our intention to establish a small monitoring task force to ensure that we get value for money and all stages are implemented along with strict guidelines and timelines.”