VALCO needs US$600 million to modernise aging smelter

The Volta Aluminium Company Limited (VALCO) has said it needs some US$600million capital to revamp its operations.

The struggling state-owned firm is in desperate need of a fresh capital injection to retrofit its ageing machinery and move the smelter to more than 7.5 times its current installed production capacity.

VALCO, the country’s only smelter, believes that with the right partner, it will be able to expand its production from the current 40,000 tonnes per annum (tpa) to 300,000tpa of aluminium; a 650 percent increase.

The modernisation and expansion will improve its efficiency and ensure VALCO is positioned to sustainably grow and be profitable; and contribute toward establishing and realising linkages of the upstream and downstream components of the Master-plan for the country’s Integrated Aluminium Industry (IAI).

To realise this, the Ghana Integrated Aluminium Development Corporation (GIADEC) and VALCO estimate that an amount of US$600million is required.

It is in line with this that government granted approval for GIADEC and VALCO, in June 2022, to identify and engage a strategic partner with the financial and relevant capacity to provide the needed investment and technical wherewithal plus strategic international linkages.

In a statement issued about ongoing processes to secure the partnership, the company said retrofitting will transform it from a loss-making entity into a best-in-class profit-making and shareholder value-maximising entity.

Strategic private participation will further position it to promote government’s industrialisation agenda, contributing substantially to socio-economic development and growth of the economy.

VALCOs smelting operations will allow significant value addition to Ghana’s bauxite resources. It is estimated that on an annual basis, bauxite valued at approximately US$75million can generate US$180million after refinery and US$600million after smelting.

Smelting is the key linkage between the upstream and downstream sectors of the aluminium industry, where a tonne of aluminium can generate US$6,000 – which is three times the value after smelting (US$2,000 per tonne).

Currently, VALCO is operating at 40 percent capacity with about 750 workers. After retrofitting and modernising the plant to increase production from the current 50,000 to 300,000 tonnes of aluminium per annum, the smelter will create more high-paying direct and indirect jobs.

The domestic downstream aluminium industry is currently anchored by the VALCO smelter, which produces primary aluminium. Currently, 20 percent of what VALCO produces is used by local entities for producing semi-processed and end-user materials.

The products produced locally include electrical cables and conductors, holloware (including pots and pans) and roofing sheets. The downstream industries are significantly driving the demand for aluminium, thereby providing impetus to the demand-growth for aluminium.

GIADEC’s vision for the downstream is to drive utilisation of locally-produced aluminium products in-country and beyond. Each year, Ghana imports up to 45,000 tonnes of aluminium products, and GIADEC’s aim is to have many of these products produced locally instead.

There are many opportunities to increase local production of aluminium products in the construction, automotive and packaging sectors, among others.

Globally, there has been rising demand in the use of aluminium – significantly by about 54 percent in the last decade due to its lightweight, high-strength and recycling properties. It is believed that this uptrend in demand is likely to continue in the years to come, along with the healthy pace of increase in its usage.

VALCO noted in its statement that: “A major innovation in the pipeline that could affect aluminium demand is the introduction of ‘Green metals’ and electric vehicles (EV). The advocacy on using green energy for a zero-carbon environment in the production of aluminium by global standards and some leading producing companies, as well as top companies in the downstream sector, is becoming a driving factor in the industry.

“The demand for ‘Green metals’ is a potential trigger for price hikes in the industry, as it comes at premiums.”

With the projection of building four operating bauxite mines and two refineries under the IAI Master-plan – as well as revival of the downstream sector, the proposed modernisation and expansion of VALCO’s smelter will be timely; a ‘sine qua non’ to the realisation of an integrated aluminium industry, thus creating a new Valco with much more significance than before.