VALCO seeks fresh capital injection to expand and retrofit its smelter

The Volta Aluminium Company (VALCO) revealed that it requires US$600 million in cash to modernise its operations. The struggling state-owned company desperately needs more funding to upgrade its ageing gear and expand the smelter to more than 7.5 times its present installed output capacity.

The modernisation and expansion will increase efficiency and position VALCO to grow profitably in the long term, as well as contribute to establishing and realising linkages between the upstream and downstream components of the country's Integrated Aluminium Industry (IAI). The Ghana Integrated Aluminium Development Corporation (GIADEC) and VALCO believe that US$600 million is necessary to actualise this.

Under this, the government authorised GIADEC and VALCO to find and engage a strategic partner with the financial and relevant capabilities to offer the necessary investment, technological know-how, and strategic international connections in June 2022. VALCO, the country's only smelter, estimates that with the appropriate partner, it could grow its aluminium output from 40,000 tonnes per year (tpa) to 300,000 tpa, a 650 per cent increase.

"A major innovation in the pipeline that could affect aluminium demand is the introduction of 'Green metals' and electric vehicles (EV). The advocacy on using green energy for a zero-carbon environment in the production of aluminium by global standards and some leading producing companies, as well as top companies in the downstream sector, is becoming a driving factor in the industry. The demand for 'Green metals' is a potential trigger for price hikes in the industry, as it comes at premiums," said VALCO.

The firm said in a statement regarding ongoing steps to obtain the agreement that retrofitting would change it from a loss-making entity to a best-in-class profit-making and shareholder value-maximising entity. Strategic private engagement will better position it to advance the government's industrialisation objective, significantly contributing to socio-economic development and economic growth.

The smelting activities of VALCO will add substantial value to Ghana's bauxite deposits. Bauxite worth around US$75 million is predicted to yield US$180 million after processing and US$600 million after smelting annually. Smelting is the critical connection between the upstream and downstream sectors of the aluminium industry, where a tonne of aluminium may earn US$6,000 - three times the value after smelting (US$2,000 per tonne).

VALCO is now functioning at 40% capacity, employing around 750 people. The smelter will generate additional high-paying direct and indirect employment after upgrading and modernising the facility to enhance output from 50,000 to 300,000 tonnes of aluminium per year. The VALCO smelter, which produces primary aluminium, today serves as the backbone of the local downstream aluminium sector. Local organisations utilise 20% of VALCO's electricity to make semi-processed and end-user products.

With the IAI Master plan projecting the construction of four operating bauxite mines and two refineries, as well as the revival of the downstream sector, the proposed modernisation and expansion of VALCO's smelter will be timely; a'sine qua non' to the realisation of an integrated aluminium industry, thus creating a new Valco with far greater significance than before.