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Kazakhstan Set to Produce Some of Lowest-Cost Aluminum in The World

London, July 3 (RFE/RL) -- A huge new aluminum smelter planned for Kazakhstan is expected to produce some of the lowest-cost aluminum in the world and create thousands of local jobs.

Kazakhstan Prime Minister Akezhan Kazhegeldin signed an agreement on the $750m smelter in London last month with the privately-owned Trans-World Group, one of the world's biggest producers of aluminum. Trans-World Group conducts international metals trading operations with offices in London, Switzerland, and New York. It has also invested in metal production plants and mines in Russia and Kazakhstan.

The proposed investment in the aluminium deal is between $1,200 million and $1,500 million, making it one of the largest transactions in a Central Asian republic since the break-up of the Soviet Union. Provided a feasibility study proves satisfactory -- results are expected soon -- construction will go ahead over the next three years. Trans-world intends to work in partnership with local companies. Jacques Nounou (noo-noo) one of the Trans-world management team, said: "It's a very big project." He told our correspondent that, if all goes to plan, Pavlodar, which lies 100 Kms from the border with Russia, will produce some of the lowest-cost aluminum in the world. The project will almost double the output of Kazakhstan's Pavlodar plant which produces alumina, or aluminum oxide, the raw material used to make aluminum. Output is set to go up from 1.1 million tonnes a year to two million tonnes. This will require an investment of $450M.

The alumina output from the Pavlodar plant will be used to support the new smelter which will have a annual capacity of 250,000 tonnes. A Trans-World Group spokeswoman (Julie Ayers) said the two projects are expected to create 5,000 to 10,000 direct jobs for Kazakh workers in the next three years, and are also likely to provide thousands of jobs indirectly in the construction, materials and supply industries. However, Trans-World executives also say that the Pavlodar alumina complex with its work-force of 6,000 is heavily over-staffed. They say productivity has to increase because the same number of people will have to produce almost double the amount of alumina. The aluminum will be sold on Kazakhstan's internal market and also probably exported by rail to China. However, the border facilities at Druzba will have to be improved -- the gauges of the railways in Kazakhstan and China are different and this causes big delays. A cheap source of electricity is crucial to the production of aluminum. Trans-World says it intends to become a shareholder in the Yermak Electric Power Plant, a coal-fired station 60 Kms from the Pavlodar site. The power plant was recently bought by a Japanese firm which has committed itself to supply the Pavlodar plant and smelter. Trans-World says it will secure financing for the two Pavlodar projects by promising to buy aluminum produced at the plant at a fixed cost so that lenders will be repaid. Trans-world Chairman David Reuben says financing will be arranged through international banks such as the London-based European bank for reconstruction and development, set up to promote market reforms and investment in the eastern countries. The engineering and construction of the two projects will be managed by a Trans-World subsidiary in Russia that employed many members formerly with the Russian aluminium research establishment. Trans-World -- which claims assets worth more than $1,000M -- has a range of interests including shareholdings in a number of russian metals plants, including the Bratsk and Sayansk aluminium smelters in Siberia. Reuben says that, by forging alliances with local companies, trans-world is able to promote the development of big investments, supplying infrastructure, finance strategy and expertise to firms in the East.