Thu | Dec 5, 2019

Finance ministry ditches bauxite merger proposal

Published:Friday | July 19, 2019 | 12:19 AM

A proposal by the Ministry of Transport and Mining for the listing of the merged operations of Clarendon Alumina Production Limited, CAP, and Jamaica Bauxite Mining Limited, JBM, has been shelved.

On Wednesday, Kirk Chambers, the acting director of economics at the Jamaica Bauxite Institute, told the Financial Gleaner that the Ministry of Finance and the Public Service had decided not to proceed with the proposal.

“The GOJ [Government of Jamaica] is not actively pursuing the proposed merging of CAP and JBM. The matter was raised earlier this year with MOF [Ministry of Finance], and the response was that it is not on the agenda,” he said.

However, requests for further clarification on whether that meant the project was shelved indefinitely or was to be taken up at a future date were unsuccessful. The finance ministry redirected queries to the transport and mining ministry, and Chambers is yet to explain the reason for shelving the merger.

The update from Chambers follows industry concerns reported by the Financial Gleaner that the reorganisations at Noble Group would prove challenging for the CAP-Jamaica Bauxite Mining merger transaction, specifically due to dealings related to CAP’s chief asset, Jamalco.

Noble completed a US$3.5-billion debt restructuring last December, which involved a reorganisation of the group, and is pursuing a process of incorporation for its Jamalco operations. The Hong Kong-based company owns 55 per cent of Jamalco in a joint venture with Jamaica, which holds its 45 per cent stake through Clarendon Alumina Production Limited.

Noble’s holdings in Jamalco have also been used to secure debt raised by the company.

Transport Minister Robert Montague advised lawmakers of plans for the CAP-Jamaica Bauxite merger and listing of the newly created entity in July 2018. Excepts of another presentation to Parliament emailed by the transport ministry indicated that their consideration was to “incorporate the current joint-venture agreement and eventually list the incorporated company”, even while acknowledging there were challenges to overcome. The challenges were not specified.

Had the merger been pursued, the new CAP-JBM operation would have become Jamaica’s first bauxite outfit to trade on the stock market.

The Government in April divested Wigton Windfarm through the stock market – which attracted more than 30,000 applications for shares under the initial public offering totalling $14 billion or nearly three times the $5.5 billion fundraising target – and Cabinet has signed off on the divestment of Jamaica Mortgage Bank via the same route.

The bank, which provides construction loans and also serves the secondary mortgage market, manages a loan portfolio valued at $2.1 billion amid total assets of more than $3 billion. It is fully owned by the Jamaican Government.

avia.collinder@gleanerjm.com