Three-Stage Resumption Model For Jamalco

Minister of Transport and Mining, Hon. Robert Montague, says that Jamalco will be implementing a three-stage resumption model as the Clarendon-based facility recovers from a major fire that occurred over a month ago, which has resulted in significant loss of assets and has stopped alumina production.

Minister of Transport and Mining, Hon. Robert Montague, in giving an update in the House of Representatives on September 29, said that the three-stage plan will provide the best results for all stakeholders.

“It will increase the speed with which the company’s employees and contractors are returned to full-time employment and provide the company with the income it needs to, once again, make a significant contribution to the lives of the people of central Jamaica and the wider economy,” he said.

The fire, which occurred on August 22, 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 damaged other types of equipment.

It has stopped production at the refinery, which will affect the company and the wider economy.

“There will be a decline in alumina production and the related foreign exchange earnings for 2021 into 2022 and possibly into 2023. This is already having a direct effect on the finances of the Clarendon Alumina Production Limited (CAP), as the company will not earn any income until alumina production resumes,” Minister Montague noted.

He told the House that Jamalco has property and plant insurance coverage amounting to US$250 million, to address single incidents such as the fire, and in addition to property damage, the insurance policy covers extra expenses and business interruption.

He informed that, currently, the refinery’s losses are estimated at US$500,000.00 per day based on production cost of US$150 per ton of alumina, at a production rate of 3,170 tons per day.

“The company has already submitted a claim for US$150 million for business interruption, which is expected to meet its monthly expenses for 10 months, out of an estimated 18-month period of care and maintenance of the property,” he said, noting that insurers are to release an advance payment of US$25 million.

Additionally, Jamalco has given notice of force majeure to its suppliers, including New Fortress Energy, which supplies steam to the company, stating that it will be unable to take products or pay invoices. The duration of this period is to be determined.

Minister Montague said that working capital will be needed to allow the company to execute various activities necessary to continue effectively managing the refinery, and continue land rehabilitation and various other activities associated with running the mining and alumina manufacturing operations.

“CAP may need to call on the Government to enable it to cover its 45 per cent of any reconstruction expenses that might be necessary,” he told the House.

Providing details about the three-stage resumption model, Minister Montague informed that stage one will involve the refinery being returned to action as a single-digester operation, mostly utilising existing infrastructure

During this phase, it will be necessary to rent several package boilers for low-pressure steam, replace the high-voltage infrastructure, and increase the buy of energy from Jamaica Public Service (JPS).

This phase is already being implemented, starting with the demolition of segments of the powerhouse.

Other key activities during this phase include environmental clean-up, engineering assessment of remaining structures, power and electric reconstruction, mechanical and civil structure reconstruction and return to service of the main steam turbine.

The capital required for this stage is approximately US$19 million. The construction timeline is the end of June 2022 and should result in the resumption of alumina production at approximately 50 per cent of the plant’s capacity.

Minister Montague said that operating at this level of the refinery’s capacity will result in financial losses. However, it is significantly better than keeping the plant closed for at least another seven months, during which the company would be required to continue its “very expensive care and maintenance of the facilities, while earning no income.”

During stage two, the plant will be moved to a two-digester operation, which will significantly reduce reliance on JPS and improve power plant reliability by switching to the rental of gas turbines. This stage will be completed within nine months of stage one.

A new gas-fired powerhouse with heat recovery is to be built to replace the rented boilers during stage three as focus is placed on long-term solutions and improving Jamalco’s efficiency and global competitiveness.

Minister Montague informed that a small monitoring task force is to be established to ensure that “we get value for money and all stages are implemented along strict guidelines and timelines”.

“In addition, we are using this down time to rapidly advance the process of incorporation. It is vitally important that before full recovery, incorporation is achieved. This fire has underlined the risk to our budget if incorporation is not done quickly. The Government of Jamaica is committed to this objective,” he noted.

In the meantime, the Minister said that Jamalco is making every effort to retain staff, including contractors.

Currently, mining contractors are working three days per week. Contractors involved in mothballing, which is the process of protecting the undamaged assets until they are ready to be used again, are winding down their activities.

Residue storage area contractors for dyke repairs will be engaged over the coming months.