Alcan pulling out of Utkal project in India

Alcan pulling out of Utkal project in India

ANDY HOFFMAN, Toronto Globe & Mail

13th April 2007

Alcan Inc. is pulling out of a controversial project in India, suggesting plans for a bauxite mine and alumina refinery are too risky for the Montreal company, considering its lack of control over the venture.

The aluminum producer plans to sell its 45-per-cent stake in Utkal Alumina International Ltd., the Indian company set up in 1992 to develop the mine and refinery in the State of Orissa.

The Utkal project has been marred by conflict with local residents opposed to its construction, which would require the displacement of three villages and at least 200 families. Local critics have estimated that as many as 22,000 people could be affected.

“We have carefully weighed the opportunity and risk presented by the Utkal Project, and, given constraints within the governance structure that limit Alcan's ability to participate in key decisions, believe that we have acted in the best interests of all our stakeholders,” Jacynthe Côté, president and chief executive officer of Alcan Bauxite and Alumina, said in a statement.

Alcan's partner in the project, which is still in the engineering stage, is Hindalco, the industrial division of the Indian conglomerate Aditya Birla group. Hindalco launched a takeover bid worth $3.4-billion (U.S.) plus debt, earlier this year for Novelis Inc., a maker of rolled aluminum that Alcan spun off in 2005.

In the past, Alcan has said it would have to invest up to $600-million, in the

Utkal project if it were to proceed. In December, 2000, police in Kashipur opened fire on protesters opposed to the Utkal mine and smelter, killing three people.

Dick Evans, Alcan's president and CEO, was confronted by protesters at the company's annual general meeting in Montreal last year, shouting “Alcan out of Kashipur!”

A resolution calling on Alcan to sponsor an independent committee to asses the project's impact on the community was narrowly defeated. More than a third of shareholders voted in favour of the proposal.

In a note to clients, TD Newcrest analyst Greg Barnes said the Utkal project “does not fit with Alcan's approach to sustainability.”