Yuri Adno

T

he development strategy of SUAL Holding, the world’s top ten aluminum company, is based on a balanced and dynamic development of all stages of technological process along with defining priority commitments aimed at improving efficiency of each enterprise. Simultaneously, there is an assumption that allows one to foresee good prospects for development of production and business as a whole. The company’s major advantage is its own raw material base and its major asset, Middle Timan Bauxite deposit.
Russian aluminum industry has always been haunted by a deficit in raw materials. Even in the times of the Soviet epoch varied from 40 % to 60 %. Presently, Russian aluminum industry with its capacities designed for the production of over 3 million tons per annum on account of existing raw material resources can offer out only 2.7 million tons of own alumina, this figure meeting no more than 45 % of domestic consumption requirements. The gap between consumption demand and actual supply is covered by imports. That is why development of bauxite fields and launch of new alumina refineries are of topmost priority across Russian metallurgical industry.
The Middle Timan Bauxite deposit was discovered in the Komi Republic (in the North-East of Russia) over 30 years ago. The feasibility of developing the deposit was researched and proved in the 1980s. It is already then that it became clear that Timan bauxites could become the country’s reliable source of this raw material, permit allowing to meet the growing need of aluminum smelters.

Based on a respective geological analysis, the Middle Timan Bauxite deposit is considered the largest not only in Russia, but in whole Eurasia. Its explored bauxite reserves amount to 280 million tons and their in total are estimated at 0.5 billion tons. The average content of alumina is 45 %, prevailing siliceous module balancing between 4.5 and 7.5. Ore bodies are located at the depth from 0.5 to 50 meters, thickness of formations fluctuates from 1.5 to 50 meters. These conditions should be recognized as exceptionally favorable for developing the mine. Along thesemain components the ore contains accompanying rare metals, such as scandium, gallium, vanadium, niobium. By silicon dioxide content Timan bauxites are just a little behind the best types of world bauxite. However, the absence of harmful substances in the ore (sulfur, phosphorus, carbonates, chlorine) makes ore procession sufficiently due to the use of combined technologies developed at Russian alumina refineries.
The development of the Middle Timan Bauxite deposit was launched in 1997. For this purpose SUAL Group became a large stockholder of "Timan Bauxite" operating there at that moment. At the time very few believed in the possibility of constructing a mining complex to meet all technological, economic and environmental requirements in God-forsaken taiga with communicating infrastructure available.
Above all, this was a way for SUAL Group to care for the needs of its smelters located relatively close to Middle Timan in the Urals.
Estimates demonstrated that the project’s economic efficiency was largely determined by ore transportation costs. The railway of about 160 km long became a key factor in setting up a new alumina-aluminum complex. The through traffic on this railway being Russia’s first private one was launched in September 2002. Its construction which also involved the construction of dozens of bridges, cost over $70 million or approximately 50 % of the total investment volume. With the launch of the railway and the mine’s design capacity reached the estimated cost of Timan bauxite is becoming the lowest one in Russia amounting to only several dollars a ton. Today, a modern mining technology with the use of highly efficient equipment is being introduced at the Middle Timan bauxite mine constructed there. The site also roomed to a summer camp providing comfortable conditions to its visitors. Within the past two years the mine has increased its ore output to almost 1million tons.

Russia’s first private railroad leads to the bauxite deposit

The involvment of Middle Timan bauxites into industrial turnover appears to be exceptionally well-timed with the account for the still remaining export potential of Russian aluminum industry as well as the growing domestic demand and prospects for the country’s metal consumption. There were at least two favorable factors that contributed to the successful implementation of the project. First, it was integration processes in Russian metallurgy: that is, the appearance of strong corporations in the Russian market, such as SUAL Group allowed to accumulate sufficient investment resources for upgrading production facilities and expanding raw material base. The second factor is the support rendered to the project by regional authorities. The Administration of the Komi Republic was interested in acquiring new large production facilities and new jobs for residents of this distant region, thus it was actively lobbying the project.
It is obvious that in the short run the Middle Timan mine will become an important part of the raw material base for Russian aluminum industry. Its high technological and economic indicators along with its specific geological and mineralogical features allow further setting up of new capacities to process bauxites directly on their production site. The Komi Republic possesses considerable fuel and energy resources and sufficient electric power capacities for supplying both alumina and aluminum production facilities.
So, this was the way that a new even larger project of SUAL Group emerged, i.e. building a world-scale alumina-aluminum complex in the Komi Republic. The project feasibility study adopted by SUAL Holding Board of directors provides for the following composition of the complex:
– a bauxite mine with 6.5 million tons annual output of ore;
– an integrated alumina refinery with designed production capacity of 1.4 million tons a year;
– an aluminum smelter with design capacity of 300,000 to 500,000 tons of aluminum a year.
The surplus of alumina will be sold in the open market.
The timeline of the project implementation is as follows: the design capacity is to be reached between 2011 and 2012, first marketable products are to be delivered in 2007 to 2008. The project’s estimated cost amounts to $2.1 billion.
In February 2003 SUAL Group established Komi Aluminium, a closed joint stock company (ZAO) "Komi Aluminum", to implement the project. Construction will be launched at the end of this year.
SUAL is about to settle one of the most important questions concerning the project the issue of its power supply within the Komienergo system. Currently there is a cooperation agreement between SUAL Group, RAO UES of Russia and the government of the Komi Republic . It provides for reservation of capacities at the Pechora hydroelectric power station required for the project as well as a perspective launch of new capacities at the Pechora hydroelectric power station solely for the "Komi Aluminum" project. It is anticipated that generating facilities with the capacity of 860 MW will be reserved at the Pechora hydroelectric power station for supplying electric power to the new alumina-aluminum complex.


In June SUAL Group signed a mandatory agreement with the International Finance Corporation (IFC), which is a member of the World Bank’s group, and the European Bank for Reconstruction and Development (EBRD) on financing the first phase of the project. Phase 1 foresees expansion of mining capacities to 6.5 million tons per annum. Vladimir Kremer, Diirector General of ZAO "Komi Aluminum", called the involvement of both the IFC and EBRD at this stage "very positive". "The EBRD’s local market expertise and the IFC’s global reach and mining sector knowledge, as well as their combined financial strength, will help SUAL to realise its vision of an integrated bauxite-alumina-aluminum complex in the Komi Republic, stresses Vladimir Kremer. He also believes that the participation of these financial institutions in the "Komi Aluminum" project "will have a positive impact" on the development this northern republic as a whole.
Already in July 2003 SUAL Group released the results of a tender for a bank feasibility study (BFS) for the "Komi Aluminum" project. The first phase of the pre-feasibility study will be executed by SNC-Lavalin International and Hatch Associates. The BFS will involve several separate phases and its first results are expected already by the end of the year.
Setting up the alumina-aluminum complex can be regarded as kind of a springboard for future development of all the region that possesses the richest mineral resources. One cannot rule out that when realizing the project there may emerge an absolutely new configuration of production forces in the North-East of the country. Mineral resources of the Komi Republic in combination with the industrial potential of the neighboring Sverdlovsk region (the Urals) can become a basis for an intensive economic development in this part of the country.