Bauxite mines will deliver, eventually

March 18, 2017 - 17:01

Nguyễn Văn Biên, VINACOMIN deputy director, tells Tuổi Trẻ (Youth), that there are positive aspects to the Tân Rai bauxite mining project.

Nguyễn Văn Biên, VINACOMIN deputy director, tells Tuổi Trẻ (Youth), that there are positive aspects to the Tân Rai bauxite mining project.

Please explain the big discrepancy between the loss of VNĐ860 billion (US$38 million) reported by the Việt Nam National Coal and Mineral Industry Group (VINACOMIN) in the first 3 years of operating the Tân Rai bauxite mine and the figure of almost VNĐ 3,700 billion ($162 million) estimated recently by a State financial inspection team.

The project has been in operation since October 2013. The project document itself states that the project would run at a loss for the first four years. However, after three years of operation, the real loss incurred had jumped to VNĐ 3,696 billion ($162 million).

Such a big loss should be broken into two segments: business production: VNĐ2,520 billion ($111 million) and increase in the foreign currency exchange rate between the US dollar and Vietnamese dong, amounting to VNĐ1,176 billion ($52 million).

In real life there are various ways to estimate the planning losses. The figure we came up in 2014 was only one of the scenarios and that number was only a reference. As we all know, in each scenario, the calculation of the projected losses or gains depends on the input prices.

So what were the actual loss causing factors?

The Tân Rai project is a big one. Its technology is new and complicated. Furthermore, it is the first project in this field being implemented in our country. Then, regarding some of the operational costs, the project owner has been in a passive position (factors beyond the owner’s control). These objective reasons have led to a prolonging of project implementation and added more costs.

However, in my opinion, the major factor has been market price fluctuations. When the project document was being finalised in 2014, the selling price of one tonne of aluminium was US$326. And it was projected the price would increase by 1.21per cent per year. Based on that assumption, in 30 years, the price would be about US$350 per tonne. However, at a certain time the price dropped to as low as $200/tonne.

Adding to the price fluctuation, our policies in the last three years have also been subjected to changes. At the beginning, the Tân Rai and Nhân Cơ projects served as two pilot projects. That means their products did not have to pay any export tax. More recently, a 2 per cent tax has been levied on the two projects’ products.

Besides, the tax levied on natural resources was also increased from VNĐ 140,000 to VNĐ 170,000 per tonne for iron ore. The costs of exploration rights and the use of geological documents have also risen.

When will the Tân Rai project break even, according to VINACOMIN?

After three years of operation, we have a good command of the technology and our products have met standards. I can say now that we can even improve it a little bit. Thanks to our efforts, the cost of producing alumina per tonne was reduced to VNĐ 4.6 million per tonne in 2015 from VNĐ5.1 million in 2014. And in 2016 it dropped further to VNĐ4.1 million per tonne.

At present, the export price of alumina is higher, at about VNĐ8 million ($350) per tonne. In reality, since late 2016, the project has achieved the goal of balancing income and expenditure. It is projected that in 2017, the profit that Tân Rai project will earn is about VNĐ100 billion ($4 million). I’m confident that the profit will incrementally increase, year after year. It is projected that by the year 2023 – 2025 the project will achieve its break even point.

What about the Nhân Cơ Bauxite Mining project?

With lessons learned from the Tân Rai project, VINACOMIN has adjusted and improved the technology used for Nhân Cơ.

The Nhân Cơ project is very important for Việt Nam and it has been subjected to tight inspections by concerned government agencies.

The most up-to-date technology has been used in the project. So its products have been highly rated for quality.

What’s more important is that all its targets have been achieved. In the future, if the Government gives the nod to expand the project, I’m pretty sure that the project will deliver big benefits to the nation. -- VNS