Nhan Co bauxite refinery plant under construction in the Central Highlands province of Dak Nong
Latest calculations show Vietnam's second bauxite plant will suffer even bigger losses than estimated last month, but its investor, the state-owned Vinacomin group, insists that the project will be effective in the long term.
Speaking to the press early this week, Bui Quang Tien, director of the Nhan Co Plant Management Board, said the plant, situated in the Central Highlands Province of Dak Nong, will suffer losses of some VND2.5 trillion (US$118.1 million) over the first seven years of operation.
Last month, Vinacomin had said the project will incur an estimated loss of over VND1 trillion in the first five years of operations due to economic stagnation.
The latest adjustment of the projected losses, according to Tien, was because the construction's progress has been delayed by "force majeure" like a power cut that lasted more than one month, a cut in water supply that lasted more eight days, and over 300 stormy and rainy days.
Nhan Co's construction started in February 2010 and was slated for completion in 24 months, but it will not be finished until June next year.
As it is taking longer time to construct the plant, input costs have increased, leading to a rise of 37.8 percent in investment, said Mai Chien Thang, deputy director of the project management board.
Its investment has been adjusted from VND11.62 trillion ($548.9 million) to VND16.01 trillion ($756.3 million), Thang said.
Despite the rise in the plant's projected losses, Tien claimed that Nhan Co will generate profits in the long term.
From the seventh year, it will start generating profits and ensure revenues of over VND39.4 trillion ($1.86 billion) to the state budget over the 30 years it operates, as well as jobs to some 2,000 people, he said.
Vinacomin and the Government have been under pressure to halt construction of Nhan Co plant as well as that of the nation's first bauxite plant, Tan Rai, which was slated to go into operation this September in the Central Highlands Province of Lam Dong.
Economists have for long raised concerns over the projects' effectiveness, especially after the government canceled the group's plan to construct a port to export alumina in the central province of Binh Thuan in February.
The government's order was issued because Vinacomin had failed to implement the Ke Ga Port project five years after conception.
However, the mining group's spokesman last month announced that the group will go ahead with the mining projects, saying that they will be effective with support policies from the government, including tax incentives.
A 2007 government plan aims to produce 6-8.5 million tons of alumina annually by 2015 by building six processing plants in the Central Highlands.
Tan Rai and Nhan Co plants are both designed to have an annual output of 650,000 tons of alumina.
Vietnam has some 5.5 billion tons of bauxite reserves, considered the world's third largest after Guinea and Australia, according to a report by the US Geological Survey in 2009.
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