UAE's Mubadala to buy Guinea alumina

By James Cordahi and Dayan Candappa

DUBAI (Reuters) - Abu Dhabi's Mubadala Development Co. is to buy an alumina refinery company in the West African nation of Guinea to secure supplies for its aluminum projects which include the world's largest smelter, a top executive said.

The acquisition of the company, which also mines for the raw material bauxite, will be finalized in a week, Mubadala's chief operating officer, Waleed al-Mokarrab al-Muhairi, told the Reuters Middle East Investment Summit in Dubai on Monday.

He declined to give further details.

Mubadala is owned by the government of Abu Dhabi, which controls more than 90 percent of the United Arab Emirates' oil reserves.

Mubadala and state-owned Dubai Aluminum are building an $8 billion smelter in Abu Dhabi that will eventually have capacity of 1.4 million metric tons a year, making it the world's largest.

"Our comparative advantage is energy," Muhairi said. "Plants are shutting down in the West."

Mubadala has had discussions with the world's largest aluminum producers such as Alcoa Inc. (AA.N: Quote, Profile, Research, Stock Buzz) and Alcan Inc. AL.TO, Muhairi said, without being more specific.

Energy typically accounts for between 30 percent and 50 percent of the cost of aluminum production. Four of the five biggest holders of natural gas are in the Gulf, including Qatar, the United Arab Emirates and Saudi Arabia.

Mubadala is also a partner with Canada's SNC-Lavalin (SNC.TO: Quote, Profile, Research, Stock Buzz) in a $5 billion venture building a 700,000-metric-tons-a-year smelter in oil and gas producer, Algeria.

The investment agency, which partners companies such as Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) and Occidental Petroleum Corp. (OXY.N: Quote, Profile, Research, Stock Buzz), is also considering a third aluminum project to be located in the Gulf, as well as buying more producers of alumina, Muhairi said, declining to be more specific.

"Australia is a very large source of alumina. Africa is a major source," Muhairi said.

The Guinea purchase would supply around 30 percent of the Abu Dhabi aluminum smelter's initial capacity of 750,000 metric tons a year, Mohairi said.

With two tons of alumina needed to produce one ton of aluminum that would put the mining operation's capacity at around 450,000 tonnes a year.

Muhairi said Mubadala is in talks with makers of automotive components about setting up in Abu Dhabi to produce parts such as engine blocks and benefit from aluminum production from the planned smelter.