Thank you, Mr. Speaker. Mr. Speaker, the VALCO smelter consists of a self-contained reduction facility that includes a private dock, raw materials storage area, carbon anode manufacturing and a value-adding metal casting facility. The reduction process is accomplished by means of five pot lines -- one hundred pots per line for a total of five hundred (500) pots.
The construction of the VALCO Smelter began in 1964, with the first aluminium poured in 1966. Actual commercial operations commenced in March 1967 with three pot lines in operation. The fourth pot line was constructed and put in service in 1972. The fifth and final pot line was constructed in 1977. The maximum designed capacity of the smelter is 200,000 tonnes per year with all five lines in operation.
VALCO produces aluminium of world- class quality by electrolytic reduction of alumina (derived from bauxite) to meet the entire Ghanaian (local) demand and for export. Most of the aluminium produced is converted into value-added products like billets (for the manufacture of aluminium doors and window frames), rolling ingots (for the manufacture of aeroplane parts, beverage cans) and foundry ingots and sows (for the manufacture of electrical wires, roofing sheets, cooking utensils,
Why VALCO is currently shutdown
VALCO's history of shutdowns is attributable to inadequate supply of electric power. However, the current shut down which occurred on January 3, 2009 was mainly due to the effect of the global economic meltdown. As a world- class facility operating in both the local and global commodity (metals) markets, events on these markets have a direct impact on the company.
As may be recalled, the global aluminium market began deteriorating when key customers/players in the banking/financial, automotive and housing markets started defaulting on their obligations in late 2008 stirring a crisis in the financial market.
The result, among others, was a drastic reduction in the demand for aluminium, the metal used in the housing and auto industry and this led to a soaring of inventories of primary aluminium products on the world market. The interplay of the forces of demand and supply thus caused prices to fall significantly because supply had outstripped demand.
Consequently, the London Metal Enterprise (LME) -- aluminium price which is used worldwide as a benchmark -- which was about $3,071 in July 2008 slumped to about $1,490 a metric tonne by December, 2008. This situation made it uneconomical for VALCO to continue to operate. Therefore, on January 3, 2009, the facility, like several others around the globe, had to shut down to re-start when conditions improved.
The January 3, 2009 shutdown unfortunately, compelled VALCO to declare a sizeable number of its highly- skilled employees redundant. The plant currently has 60 employees, about 75 per
cent of whom are security and firemen.
All major and sensitive equipment have been properly de-commissioned and protected so that they can be used again in the foreseeable future. The sensitive de- commissioned equipment are periodically serviced to preserve their integrity so that they can be easily commissioned once a decision is made to restart.
Plans to reopen the facility
The conditions that triggered the shutdown in January 2009 have since improved considerably. Aluminium prices have recovered from the low of $1,200 a metric tonne (January 2009) to an average of $1,947/mt (spot price as at October 27, 2009); and $2,010.50/mt (which is the 3 months average price).
Again, low water level in the Akosombo Dam due to drought or low rainfall which had in the past led to insufficient electric power and hence triggered shutdowns or capacity reduction in VALCO, fortunately, is not the case today.
The favourable rainfall patterns of 2008 and 2009 have seen the lake level rise above two hundred and seventy feet (270) and still rising. Additionally, the Bui Hydro Electric and Independent Power Producing (IPP) Projects would help to significantly improve the energy supply outlook in the country.
The combination of a reasonably good metal price and the improved energy outlook puts VALCO in a favourable position to restart the smelter facility so Ghana can continue to reap the full benefits that an operating VALCO makes possible.
VALCO currently has in stock substantial amounts of major raw materials to get the plant running for at
least 3 months before replenishments are required. It is estimated that at least two months will be required to hire employees, train and re-train them and to re-commission the equipment before actual manufacturing operations start.
Impact of VALCO operations on Ghana's economy
At a long-term metal price of $2.500/ tonne, the smelter operations alone would reap revenue of at least $500 million at full business potential. VALCO's operations would inject revenue of about $300 million into Ghana's economy through VRA Power Purchases, Income Tax/ VAT, VALCO Fund, Property Rate, Port Charges, Local Purchases, Indirect Labour (Local Contractors), et cetera.
Additionally, the following benefits are derived from VALCO's operations:.
The VALCO plant employs directly over 1,200 Ghanaians; there were 2,100 Ghanaian employees in 1981; It is a major source of raw material to rolling mills -- Aluworks, rod mills -- Western Rod and allied companies in Ghana; West Africa and is a foundation for the ever-growing aluminium product factories in the country;
Opportunities for establishment of new downstream industries (Extrusion, Alloy rims and other fabrication plants, et cetera);
Expertise-sharing regarding world- class safety standards, work ethics, Organizational, management and Maintenance expertise;
Significant contribution to the development of health and education at all levels through regular cash donations to the VALCO Trust