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Iran seeks $10b to work on aluminum with Guinea.

Iran is seeking $10 billion to develop a domestic aluminum industry that could export 60 percent of its production to meet growing global demand for the metal used in cars and beverage cans.

The raw material, bauxite, is not common in Iran, but the government calculates it can turn imported bauxite into aluminum cheaply--largely because aluminum manufacturing take lots of electricity and Iran is willing to subsidize it for the aluminum industry.

Iran signed a deal with the African country of Guinea in 1992 to buy its bauxite. Nothing came of that deal. Then, last August, Iran revived the plan.

Iran's aluminum production of 350,000 metric tons a year is below capacity of 470,000 tons because of a shortage of bauxite and insufficient electricity generation, Mehdi Karbasian, managing director of the state-owned Iranian Mines and Mining Industries Development and Renovation Organization (IMMIDRO), told a conference in Tehran last Wednesday. With additional investment, Iran could boost output to 1.5 million tons by 2025, he said.

Iran is now awaiting a consultant's recommendation, due in September, on how to make the mine in Guinea operational.

"The mine in Guinea has more than 500 million tons of bauxite, but it's far from the sea and there is a need for rails to be put in place," Karbasian told Bloomberg News. "We are weak when it comes to bauxite reserves."

Iran will be entering a crowded market in the Middle East where production has grown to represent almost 10 percent of global output, in part because of low energy costs. Emirates Global Aluminum, based in the United Arab Emirates, boosted output 4 percent last year to 2.4 million tons while Aluminum Bahrain BSC wants to increase its production by 540,000 tons to 1.5 million tons.

Aluminum prices have dropped about 40 percent in the past five years as economic growth cooled in China, the world's biggest producer and consumer.

Iran has invested $2.7 billion in its aluminum industry, and that figure needs to be raised "substantially" to meet domestic and Middle East demand, Karbasian told the conference in Tehran.

Global aluminum demand will climb 5 percent in 2016 while production expands 2 percent, leaving a deficit of 1.1 million tons, Alcoa Inc., the biggest US aluminum producer, said in an April investor \o "Link to presentation" \t "_blank" presentation. Middle East and North Africa consumption expanded 5 percent in the first quarter, driven by 12 percent growth in Saudi Arabia, Aluminum Bahrain said in its investor presentation this month.

Guinea holds 7.4 billion tons of bauxite, more than any other country, according to the US Geological Survey. It only accounts for 6 percent of global output due to limited exploration and infrastructure, Bloomberg Intelligence industry analyst Yi Zhu said in a report. Australia and China are the biggest bauxite producers, according to USGS.

Under the deal with Guinea, Iran is to hold a 51 percent stake in the Societe des Bauxites de Dabola-Tougue (SBDT) project and the Guinean government the rest of the enterprise.

The agreement was first signed in 1992 to ship 4 million tons of bauxite per year to Iran, but the operation never started.

Iran and Guinea have also discussed investment plans to develop the African country's iron, gold and diamond reserves.

Iran's biggest aluminum manufacturer, the Iranian Aluminum Company (Iralco), is based in Arak and listed on the Tehran Stock Exchange.
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Title Annotation:Economy: Money and its impact
Publication:Iran Times International (Washington, DC)
Geographic Code:7IRAN
Date:May 20, 2016
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