London, Thursday 21 June 2001
The Boards of Billiton Plc, Mitsubishi Corporation of Japan and the
Industrial Development Corporation of South Africa Ltd (IDC) announce the
decision to go ahead with the Mozal expansion project (Mozal 2). The project
will add a further 253,000 tonnes per annum (tpa) of aluminium capacity at
the smelter near Maputo, at a construction cost of US$860 million (BHP
Billiton share US$405 million), equivalent to a competitive US$3,400 per
tonne of new capacity. Construction will commence immediately and
commissioning is scheduled for late 2003, with full production expected
after six months. The approval of the expansion by the Government of
Mozambique was given in February when the Addendum to the Investment Project
Authorisation (IPA) was issued.
After expansion, the twin-potline, 506,000 tpa smelter will be a
particularly low cost and high quality aluminium producer, consuming some
900 megawatts of electricity and 1,000,000 tpa of alumina. Internationally
competitive electricity prices, previously negotiated with the Mozambican
Transmission Company (Motraco), will apply until the end of 2025. The
increased electricity demand will accelerate the Mepanda Uncua hydroelectric
development, adding a further boost to the Mozambican economy.
The ownership of Mozal 2 has been aligned to Mozal 1, with Billiton holding
a 47.11% interest, Mitsubishi 25% and the IDC 24.04%. This has been achieved
by Billiton's sell-down, at fair value, of 37.89% of its preferential
expansion rights of 85%, to its project partners Mitsubishi and IDC. The
Government of Mozambique will hold 3.85% in the form of preference shares.
The financing structure consists of 40% equity (US$400 million) and 60 per
cent debt (US$600 million).
Senior debt will be mainly in the form of export credit from South Africa
(US$250 million) and France (US$150 million). A further US$125 million will
be provided by the Mozal 1 international funding agencies, with two new
lenders, JBIC from Japan (US$75 million) and EDC from Canada (US$25
million). The peak-funding requirement, including interest during
construction, is projected to be US$1 billion.
The US$1.34 billion Mozal 1, which was launched in 1998, was the biggest
single project investment ever made in Mozambique. The smelter was
successfully completed six months ahead of schedule and over US$120 million
under budget.  Since full commissioning of its 253,000 tpa capacity in
December 2000, it is achieving world-class operating standards. Mozal 2 will
enjoy an attractive power tariff and fiscal arrangements similar to those at
Mozal 1. In addition to significant employment benefits, the expansion
project will provide a powerful boost to the Mozambique economy by
increasing the industrial base and export potential of the region.
Commenting on the announcement, Mr Carlos Morgado, Minister of Industries
and Commerce said:
"The Mozal project proved to be a world-class project and its inauguration
last September clearly put Mozambique on the investment map. It demonstrated
the benefits that flow from partnerships, between governments and the
private sector, and between the many nations, companies, investors and
stakeholders involved with the project. The announcement of this major
expansion is a further signal that Mozambique is an investor friendly
country."
Brian Gilbertson, Chairman and Chief Executive of Billiton said:
"The competitive capital cost and high-return profile of the project, and
the availability of stable, long-term and competitively priced power, have
always made the Mozal expansion an attractive proposition. Mozal 1 was an
unequivocal technical and commercial success. The continuing positive
investment climate in Mozambique, coupled with a structural improvement in
the supply outlook of the aluminium industry, have now given Billiton and
its partners the confidence to launch Mozal 2.
"Next week we expect to finalise the merger between BHP and Billiton.  The
Boards of both companies can think of no better project than Mozal 2 to
reinforce BHP Billiton's commitment to profitable growth for shareholders.
In addition to enhancing the quality of the new Group's world-class
aluminium portfolio, the project reinforces the investment appeal of
Southern Africa, which will continue to be an area of interest and
importance for BHP Billiton."
Khaya Ngqula, President and Chief Executive of the IDC, commented:
"The successful completion of Mozal phase 1 has significantly increased
investor and lender confidence in the SADC region. In order to maintain the
momentum of economic growth, development and job creation created by Mozal,
IDC is eager to participate in the expansion of this mega project. The
participation of major international investors like BHP Billiton and
Mitsubishi Corporation as well as the Mozambique Government have made the
world aware of potential to be harnessed within the SADC region."
Mr Takeshi Sakurai, Executive Vice President, CEO Metals Group of
Mitsubishi, concluded:
"This is the biggest involvement of Mitsubishi in an industrial development
project in the Southern Africa Development Community. Together with BHP
Billiton and IDC, we look forward to contributing to the economic growth of
the community and encourage other investors to find other investment
opportunities in Mozambique."
ends
BACKGROUND NOTES
Cost Competitiveness
The construction cost is estimated at US$860 million.  The peak funding
requirement is US$1 000 million.
Billiton has contracted to supply alumina linked to the LME aluminium price.
Modern technology and a cost effective operating regime combined with long
term supply contracts for alumina and electricity are expected to maintain
Mozal's position as an aluminium producer in the lowest cost quartile by
world standards.
Scope of Mozal 2
Mozal I was designed with the Mozal II expansion in mind. The existing site
has space for the installation of a second potline, anode baking and
casthouse facilities. The only significant additional infrastructure
required offsite will be a second ship unloader and storage capacities
within the Mozal harbour at the Matola port, to handle the additional raw
material imports, and an extra 132 kV transmission line from Motraco's
substation located near to the smelter site.
Mozambique Government Co-operation
In 1995 the Mozambique Government approved the Industrial Free Zone (IFZ)
legislation which is aimed at encouraging and sustaining investment in
Mozambique. The Mozal 1 project was approved in December 1997 and in
February 2001 the Government signed the Investment Project Authorisation
(IPA) for Mozal 2.
It is expected that the excellent partnership with Government that
contributed towards the success of Mozal 1 will continue and will ensure
another successful investment in Mozambique.
Employment and empowerment
It is estimated that up to 5 000 Mozambicans will be employed on site at
peak construction. Training will be offered to selected candidates in
construction skills with preference given to people who previously worked on
the Mozal construction site and who live in the area. Successful trainees
will be registered in a pool and contractors will hire their employees from
this pool.  Once completed the smelter will provide employment for an
additional 270 Mozambicans, taking the total complement to 1 000.
An empowerment initiative will be launched in partnership with the Centre
for Investment in Mozambique (CPI) and the IFC's development company to
identify, train and mentor selected local contractors. Modules have been
specially identified to suit the capacity of smaller contractors.
Environment
The original environmental impact assessment (EIA) conducted for the smelter
was based on a nominal capacity of 500 000 tpa. The Council for Scientific
and Industrial Research of South Africa (CSIR) has been closely involved
with Mozal from impact analysis phase through to the implementation of the
environmental management and monitoring plans. CSIR were appointed to
conduct a further study for Mozal 2 with specific focus on the Matola
harbour expansion and other identified issues.
The assessment concludes that no environmental factors exist that preclude
the expansion of either the smelter or the Matola harbour terminal. Based on
the experience gained during Mozal 1, it is expected that the environmental
management process can be further improved upon during Mozal 2.
Construction Schedule
Construction will commence immediately and the main facilities should be
complete in 27 months, with the plant ready to receive initial raw material
shipments towards the end of 2003. The first aluminium ingots should be
produced in late 2003.
The same joint venture contracted for Mozal 1, SNC Lavalin of Canada and
Engineering Management Services of South Africa (SNC-EMS), has been awarded
the EPCM contract for Mozal 2.
Technology
The technical design of Mozal 1 was largely replicated from Hillside
Aluminium Smelter and Mozal 2 will again use the same AP30S technology
supplied by Aluminium Pechiney of France.
Michael Campbell
Manager Corporate Affairs
Billiton
Tel: +27 11 376-3360
Fax: +27 11 376-3362
Mobile: +082 458 2587
Website: http://www.billiton.com