Vinacomin’s bauxite-alumina project records $162 million loss

As reported by newswire vneconomy.vn, a recent inspection by the government concluded that up to now Tan Rai bauxite-alumina complex has suffered a VND3.696 trillion ($161.8 million) loss.

The complex is located in the Central Highlands province of Lam Dong and has a total investment value of $460 million.

After four adjustments, the most recent being in October 2013, the total investment in the project reached VND15.4 trillion ($674 million). This one project alone was expected to reach the annual designed capacity of 650,000 tonnes in 2013 already.

The project was put into operation in 2013. In 2016, Vinacomin was still constructing the third red sludge reservoir and other auxiliary facilities. Vinacomin said it had disbursed VND12.145 billion ($531.74 million) by the end of 2016.

Inspectors concluded that the increase in investment and lengthening the project’s duration, besides the annual capacity adjustment from 600,000 to 650,000 tonnes with the change in technology, is due to the changes in tax policy, wage expenses, site clearance compensations, currency depreciation, and most importantly, the low capacity of the investor and contractors.

“After three years (from October 2013 when it was launched to September 30, 2016), the bauxite-alumina complex in Lam Dong has accumulated a loss of VND3.696 trillion ($161.8 million). In particular, the operating loss was VND2.520 trillion ($110.3 million), and loss from foreign exchange fluctuation was VND1.176 trillion ($51.5 million),” said the report.

Currently, most of the aluminium products go for foreign sales, thus, the foreign exchange loss can be covered after the products are exported.

Vinacomin earlier planned for an operating loss of VND1.660 trillion ($72.7 million), but now the actual number has exceeded even that. The report said the main reason is the complicated technology being implemented in Vietnam for the first time. At first, when the production lines were put into operation, it was not stable and incurred many expenses for mending and improving.

Nevertheless, at present, the production lines are in stable operation, nearly reaching the designed capacity, while the cost of production decreases and alumina prices in the world have recovered. It is anticipated that the plant will make profit from 2017.

The other bauxite-alumina complex invested by Vinacomin, Nhan Co, is going to be put into commercial operation in the first quarter of 2017. Nhan Co, located in the neighbouring province Dak Nong, was approved in 2007 with the investment value of VND3.285 trillion ($143.89 million) and a capacity of 300,000 tonnes a year. The complex was expected to be finished in 2010.

This project was adjusted three times. According to the latest adjustment in February 2014, the project’s construction deadline was pushed off to 2014 with the total investment of VND16.821 trillion ($736.79 million) and capacity of 650,000 tonnes a year, which is equal to the Tan Rai alumina plant’s intended capacity.

“Basically, the project has been finished and its test run produced hydrate products on November 10, 2016, and alumina products on December 2016. The plant will be put into commercial operation by the first quarter of 2017. Total adjusted investment rose by VND13.536 trillion ($592.6 million), and the construction took six years slower than initially planned,” said the report.

The report also mentioned that by adjusting the annual capacity from 300,000 to 350,000 tonnes, the construction was delayed by two years to reassess construction efficiency. The project also suffered from “political instability,” and the import of supplies and equipment was influenced by changes in foreign exchange rate (from VND16,000 for $1 to VND20,643 for $1).

Besides, the report also named the adjusted wage policy, which increased the cost of labour, and change in site clearance compensations.

The losses and investments into the projects have not counted the harm to the environment the projects have been causing. Although many leaders of Vinacomin repeatedly declared that the two projects are not harmful for the environment, the daily lives of citizens nearby have been significantly affected. They have to bear the stench of red sludge and deal with the immense dust created by the plants. According to residents, aluminium dust is everywhere, in the gardens, rooftops, even inside the houses. Many people, especially the elderly and children, have been suffering from several respiratory diseases and some had to move to other regions. The discharged waste seeps into the ground, killing plants and causing itches upon touch.

Although the Nhan Co plant has not been officially launched, in 2016, when pumping alkali through the pipes, employees found the chemical gun broken, which resulted in 9.58 cubic metres of alkali leaking into the ground. A part of these poisons reached the Dak Dao stream, causing mass fish deaths.

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