Reconstruction Process At Jamalco On Track – Minister Clarke

Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says the reconstruction process at Jamalco is on track and will take place over three phases.

He said that in phase one, which should occur by June 2022, Jamalco expects the recommencement of operations at up to 50 per cent of capacity using steam from a set of boilers now being installed.

“It is expected that mining operations and associated jobs will begin to be restored in the weeks prior to the resumption of production,” Dr. Clarke said.

He was responding to questions from Opposition Spokesman on Mining and Energy, Phillip Paulwell, during the siting of the House of Representatives on February 1.

Dr. Clarke also informed that by the end of September 2022, Jamalco expects to be back at 100 per cent production, which will mark phase two.

“Production costs should then be lower than in phase one but still not at the most efficient levels possible because, in phase two, Jamalco will still be relying on the temporary steam solution,” he pointed.

Phase three involves the rebuilding of the powerhouse, and Jamalco is considering several strategic options in this regard. It is anticipated that completion of this reconstruction will be achieved by 2024.

A fire at Jamalco, which occurred in August 2021, resulted in loss of vital assets, including the powerhouse, two turbine generators, turbine generator control equipment, two control rooms and a fuel oil pump station, and damage to other types of equipment.

Meanwhile, Dr. Clarke informed the Lower House that a claim has been made on the company’s insurance for the full policy limit of US$250 million.

“The insurance policy has many layers, and a consortium of insurers and reinsurers provided coverage for different layers of insurance and in different amounts. Payment is expected to be made over time as Jamalco rebuilds and restores. However, the expectation is that the claim will be settled in full over the course of time,” he indicated.

He noted that as of January 12, 2022, total insurance proceeds received total US$68 million.

The Minister informed that the funds from the payments received, to date, are being used to finance the clean-up, asset preservation and phase-one restoration activities.

Jamalco has also put in place governance measures to satisfy the insurers that the insurance proceeds are used for restoration, rebuilding and loss of earnings. This is necessary for future insurance payments to be released from the insurers to Jamalco.

In addition, all mining contracts were suspended with effect from October 6, 2021. However, limited reclamation and rehabilitation works are ongoing.

“The expectation is that with boilers now arriving and installation commencing, phase-one production will begin by the end of June. As such, mining activities are expected to resume, to some extent, in the weeks prior to the phase-one resumption,” Dr. Clarke said.

The Minister also explained the current contractual arrangements with New Fortress Energy (NFE), suppliers of steam to Jamalco.

“NFE’s power plant produces energy for the national grid. The steam produced as a by-product is sold to Jamalco. Jamalco’s long-term contractual arrangement with NFE is a take-or-pay agreement and this has not changed. However, a force majeure notice was served on NFE after production ceased as a consequence of the fire,” Dr. Clarke said.

He noted that since the fire, Jamalco has not made any monthly payments to NFE under this contract, noting that the arrangement has 18 years remaining, and it is expected that the terms will remain attractive to Jamalco once production resumes.