US embassy cable - 04ACCRA2527

UNCLAS ACCRA 002527 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PLEASE PASS COMMERCE RASHIDA PETERSEN 
TREASURY FOR ALEX SEVERENS 
OPIC FOR CONAL DUFFY 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, EMIN, ENRG, GH, EXIM, OPIC 
SUBJECT: ALCOA'S BID FOR VALCO 
 
 
1. (SBU) Summary.  EconOffs met with Randy Phillips and Jeff 
Heeter of Alcoa December 14.  Phillips and Heeter were in 
Ghana to follow up on Alcoa's proposal to purchase a larger 
stake in the Volta Aluminum Company(VALCO) and develop 
Ghana's bauxite reserves.  The proposal also includes the 
construction of an alumina refinery adjacent to VALCO. 
Alcoa, which currently owns 10 percent of VALCO, also 
submitted a proposal to restart a portion of the VALCO 
smelter as soon as January.  BHP Billiton (U.K.), RusAl 
(Russia), and Alcan (Canada) have also submitted bids. 
Phillips and Heeter expressed frustration with the process 
and its lack of transparency.  Alcoa submitted a draft MOU in 
August, but has received minimal feedback from the 
International Aluminum Industry Committee set up to review 
the bids.  GoG sources claim Alcoa's bid has the support of 
President Kufuor.  End Summary. 
 
2. (SBU) Dr. Charles Mensa, who chairs the review committee, 
met with Econ Officers December 26.  He thinks Alcoa's 
proposal is the strongest and has the support of President 
Kufuor.  Phillips and Heeter met the President before leaving 
for New York, and, according to Mensa, made a good 
impression.  He said a decision could come as soon as 
January, but warned that some ministers favored the proposals 
from Alcoa's competitors.  Moses Asaga, former Deputy Finance 
Minister and current ranking opposition MP on the Finance 
Committee, confirmed in a meeting with EconChief.  The 
Minister of Finance Osafo-Maafo told Asaga that several 
members of the Cabinet oppose the President's preference for 
Alcoa. 
 
3. (SBU) Phillips and Heeter said initial tests showed the 
bauxite in Ghana to be of good quality and of sufficient 
quantity to be mined profitably.  The set up, with mine, 
refinery power and smelter is also attractive and fits in 
with Alcoa's preferred method of operation.  They stressed, 
however, that all of the MOU's submitted propose to study the 
feasibility of bauxite mining and refining over the next 12 
to 18 months.  According to Mensa, the GoG sees this as a 
formality and fully expects the mine and refinery to be 
built.  Mensa also said Alcoa breathed new life into its 
chances by bringing Phillips on board.  During his meeting 
with President Kufuor December 16, Phillips made a personal 
impression on the President that helped erase the negative 
one created by his predecessor's handling of a similar 
meeting last year.  Mensa went on to say that Alcoa still 
needed to improve its bid to stay competitive, but had no 
specific suggestions.  Phillips complained that he had 
similar conversations with Mensa, and wondered aloud about 
the transparency of the process and Mensa's motivations. 
 
COMMENT 
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4. (SBU) Mensa's nebulous responses to Alcoa's questions may 
indicate the GoG's desire to improve its position by playing 
the various bids off against each other.  The GoG intends to 
keep a significant equity stake in any deal to ensure the 
bauxite is mined.  According to Mensa the GoG will not grant 
mining concessions for the same reason.  Despite Alcoa's 
obvious enthusiasm, the foundation for a dispute may have 
been laid if the company decides the mine and refinery are 
unfeasible and still tries to hang on to any increased 
interest in VALCO  No matter who wins the bid, the USD 1 
billion-plus investment needed to bring Ghana's bauxite to 
VALCO would be the largest ever in Ghana.  End Comment. 
YATES