Canada update

Favourable rules, corporation laws lure miner to province

Brett Bundale
Telegraph-Journal

6th March 2009

Just how a multinational mining firm with a billion-dollar aluminum plant in West Africa came to call Saint John home is a tale of investors, commodity prices and corporate law.

Global Alumina calls the aluminum refinery in the Sangaredi region of Guinea the largest greenfield alumina refinery project ever.

Michael Cella, chief financial officer of Global Alumina Corp., says the firm made the move from the United States to New Brunswick - at least on paper - in order to drum up venture capital.

"The typical Canadian investor is comfortable with metals and mining," he said during an interview from New Haven, Conn. "It's sort of in the DNA of the country and the economy.

"But to the U.S. investor natural resources like mining and metals are miniscule," he said. "It's a relatively small part of any typical U.S. portfolio."

When Global Alumina began looking for capital investments to pursue an aluminum mine in Guinea, West Africa, U.S. investors shied away, Cella said.

"U.S. investors are not so familiar with Africa and are not particularly comfortable with an African investment just in terms of the risk curve," he said. "It's just the U.S. investor appetite - they'd prefer junk bonds before equity investment in Africa."

After five years Global Alumina had raised only $8 million in what Cella describes as "friends and family angel capital money."

"We were right on the cusp of what then became a huge commodities boom period and we needed to raise more than $20 million to take the next step."

Then someone introduced Global Alumina to a boutique investment firm in Toronto. Run by a former top executive of Merrill Lynch, Cella was convinced the boutique firm could help Global Alumina raise money.

"We ended up raising $50 million from Canadian investors but with the promise that we would become a Canadian public company," Cella said.

The firm found a Canadian company that had defaulted and liquated its assets but was still registered as an official corporate entity in good standing.

"It was a shell company basically sitting on a shelf doing nothing," he said.

In 2004 Global Alumina did a reverse merger with the shelved company, becoming a Canadian corporate entity listed on the Toronto Stock Exchange.

"We were initially on the venture exchange but within year we graduated to the TSX," he said.

Global Alumina decided to continue as a New Brunswick entity because of favorable rules and corporation laws in the province.

"There are certain laws that are more friendly to non-Canadian investors," he said. "It permits us to have a greater number of non-Canadian members and allows us to have meetings outside the country."

Although Global Alumina says in its press releases that it is "headquartered in Saint John, New Brunswick" the company has no physical presence in the province. It is represented, however, by the Stewart McKelvey law firm in Saint John. Its main administrative office is based in New York City and it also has an office in London, England.

The Canadian-listed firm announced this week that its 3.6 million tonne per year aluminum refinery in Guinea is on track to open by 2011. Global Alumina is a one-third owner of the plant, which has an estimated price tag of $5 billion, still to be approved by a joint venture development board of directors, Cella said.

BHP Billiton, the biggest mining group in the world, has a 33.3 per cent stake, and the Dubai Aluminum and Abu Dhabi's state-owned Mubadala Development Co. jointly own the remaining third.

Global Alumina calls the aluminum refinery in the Sangaredi region of Guinea the largest greenfield alumina refinery project ever.

Guinea is the top bauxite exporter in the world with about a third of known reserves of the aluminum ore. Bauxite is refined into alumina and then smelted into aluminum metal in a process that uses massive amounts of electricity.