House Approves Withdrawal from CDF

The House of Representatives has approved the withdrawal of US$12 million from the Capital Development Fund (CDF) to settle Jamaica Bauxite Mining Limited’s debt obligations to Glencore Limited.

Minister of Finance and Planning, Dr. the Hon. Peter Phillips, explained that this represents quarterly payments due on outstanding debts in the 2015/16 financial year.

Speaking in the House on February 24, the Minister noted that the Government in March 2014 approved the withdrawal of US$29 million from the CDF to settle obligations of Jamaica Bauxite Mining Limited to Glencore over three financial years, 2014/2017.

“This is in relation to a ten-year alumina supplier agreement with Glencore to facilitate the borrowing of US$65 million for the share of Clarendon Alumina Partners (CAP) cost of the Jamalco expansion,” Dr. Phillips said.

He pointed out that at the time CAP was constrained to borrow the amount directly, as it was party to a bond issue that had restrictive terms and conditions.

The Minister said that Jamaica Bauxite Mines had extreme difficulty in meeting the obligations under the alumina supply contracts and failed to supply some 255,000 tonnes of alumina to Glencore.

“By December 2012 when the supply contract ended, Jamaica Bauxite Mines debt to Glencore was some US$33 million. In May, an agreement was arrived at to pay Glencore an aggregate of US$33.8 million where it was owed together with accrued and unpaid interest thereon, at a rate of eight per cent per annum,” Dr. Phillips said.

“It was agreed to make initial payment of US$4 million to Glencore on

November 30, 2013; the balance of US$29 million plus interest to be paid in quarterly instalments of at least US$3 million on January 31, April 30, July 31 and October 31 commencing on April 30, 2014, with the final payment equalling the outstanding balance if less than US$3million,” he added.

Dr. Phillips told the House that the payments are to be paid from semi-annual withdrawals from the CDF.

He added that the Capital Development Order had to be approved by March, so that the April 30 payment can be made.

The CDF was established under the Bauxite Production and Levy Act. It was promulgated in 1974 when the bauxite production levy was imposed, and the proceeds of the levy directed to the CDF.