US embassy cable - 05ACCRA190

UNCLAS ACCRA 000190 
 
SIPDIS 
 
DEPT PLEASE PASS COMMERCE FOR RASHIDA PETERSEN 
TRESURY FOR ALEX SEVERENS 
OPIC FOR CONAL DUFFY 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, EMIN, ENRG, GH, EXIM, OPIC 
SUBJECT: VALCO REBORN: ALCOA SIGNS MOU WITH GHANA GOVERNMENT 
 
REF: 03 ACCRA 02527 
 
1. (SBU) On January 26, Alcoa signed an MOU with the GOG 
giving it the exclusive right to assess the feasibility of 
creating an integrated aluminum industry in Ghana which could 
pave the way for a USD 600 million investment.  If both 
parties agree on the economic feasibility of the project 
after 90 days, Alcoa will spend the following 12 months in 
the field, assessing a plan that includes the construction of 
two bauxite mines, a railroad, a refinery, and significant 
upgrades to the VALCO smelter (reftel).  Alcoa Director Randy 
Phillips told EconOff the deal also calls for the partial 
restart of the Volta River Aluminum Company (VALCO) smelter, 
which could be in operation as soon as May, 2005.  Alcoa, 
which already owns 10 percent of VALCO, will provide 
management, raw alumina, and possibly a shareholder loan to 
the GoG to cover operating costs until the end of the 
assessment period.  If the feasibility study goes well the 
final investment will exceed USD 1 billion, with ownership 
split 60-40 between Alcoa and the GOG, respectively. 
 
2.  (SBU) Comment:  Alcoa adopted the strategy of gradual 
commitment after studying the difficult experiences of other 
investors, including VALCO's previous owner, Kaiser Aluminum. 
 The idea of an integrated aluminum industry is widely 
considered a legacy of Ghana's late President and Founding 
Father, Kwame Nkrumah.  Former VALCO director Dr. Charles 
Mensah, who helped broker the MOU, has told EconOff on 
several occasions that President Kufuor intends to fulfill 
Nkrumah's dream before he leaves office at the end of his 
second term in 2008.  Alcoa's graduated approach should 
enable a smooth separation if the realities of the balance 
sheet fall short of the vision of the President.  End 
Comment. 
YATES