Davies

GOVERNMENT HAS made an agreement with Glencore of Switzerland for the sale of alumina for a five-year period, 2000-2004, Finance and Planning Minister, Dr. Omar Davies told Parliament on Tuesday.

This is part of an agreement to sell Jamaican alumina at fixed prices to help finance the budget. He said that the proposed loan being negotiated is for Glencore to lend the Bauxite Alumina Trading Company (BATCO) US$100 million for a five-year term, with payments to be offset against the proceeds from the alumina earnings.

"These sales will be on the basis of prices already agreed, some fixed for the year 2000 and the rest as a percentage of the price of alumina on the London Metal Exchange (LME)," the Minister said.

He said that the deduction for loan repayment will be made good by the Ministry of Finance in Jamaican dollars, to enable Clarendon Alumina Productions Limited (CAP) to meet its domestic financial obligations in producing alumina.

He said that the five-year agreement with Glencore did not include an additional 250,000 tonnes, which will be produced in the same period but for which no sales agreement has been concluded.

Also, the loan proposal accounts for less than 25 per cent of the guaranteed earnings from the alumina for which an agreement is in place.

"In other words, the Government has maintained maximum flexibility by utilising less than a quarter of the output for which a sale agreement exists. Furthermore, there is an additional 250,000 tonnes to be sold against which no commitment has been made and hence no obligations exist," he said.

Dr. Davies also answered questions from Mr. Ronald Thwaites (PNP, Central Kingston) and the Leader of Opposition Business, Mr. Karl Samuda.

He said that the price for the alumina was not a discounted one and was strictly a business arrangement at the normal prices which would be arranged between BATCO and Glencore.

Asked by Mr. Thwaites whether it was a forward sale or a loan the Government was arranging with the bauxite proceeds as security, Dr. Davies said that it was similar to the loan negotiated in the sugar sector.

"It's a guaranteed flow of earnings which provides the lender with security against repayment of the loan," he said.

He said that negotiations were still going on the interest rate and the Government was seeking to minimise the interest rate and have the spread between that figure and Libor as limited as possible.

"I can assure you it will be a far better interest rate than were we to borrow the funds on the international capital market," he said.