decision of Alusaf depends on the forecast of the price of aluminum and the average cost of production. Alusaf’s Hillside Project Seems like a simple business… ! Competitive Market – identical product; no tech. differences; pricetakers ! No room for fancy marketing strategies; nimble operational improvements ! Profitability boils down to a simple equation price – average cost That cannot be that hard? ! Need to understand: • What determines prices? • Which costs are relevant to Alusaf s decision
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Alusaf’s Hillside Project • At the beginning of 1994, Alusaf was considering to build the world’s largest smelter (466,000 tpy) at Richard’s Bay in South Africa • A feasibility study was done two years before, but since then the Russian flood had occurred. • Capital cost was projected to be $1.6 billion • Aluminum prices at about $1,110 • Alusaf had long-term contracts that ensured perton alumina and power costs at 41% of aluminum price • Should Alusaf go ahead with the project? How can we use supply-demand
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9 -7 0 4 -4 5 8 DECEMBER 15, 2003 KENNETH S. CORTS JOHN R. WELLS Alusaf Hillside Project At the beginning of 1994, Alusaf was considering building the world’s largest greenfield primary aluminum smelter, a 466,000-ton-per-year facility at Richard’s Bay, a deepwater port on the east coast of South Africa’s province of Kwa-Zulu Natal. Alusaf was the sole primary aluminum producer in South Africa, operating 170,000 tpy of capacity at the existing “Bayside” facility at Richard’s Bay. Alusaf’s 1993
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Econ 511: Managerial Microeconomics Spring 2010 Syllabus Department of Economics Business School HKUST Yuk-fai Fong (房育辉) Time and Venue: Section 1: 9:00 a.m. – 12:20 p.m., Saturday, April 9 – June 4 (except April 23) Section 2: 2:30 p.m. – 5:50 p.m., Saturday, April 9 – June 4 (except April 23) Venue: Room Rm 4219 (Lift 19) Instructor: Yuk-fai Fong Email: y-fong@kellogg.northwestern.edu Phone: 2358-7600 Office Location: Room 3434 Email is always a great way to reach me. Office Hours: By appointment
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1. Introduction: In June 1997, board of the International Finance Corporation (IFC) was proposed with a $120 million debt-side investment opportunity in the Mozal project, a $1.4 billion aluminum smelter in Mozambique. The initiative shareholders approached IFC for their participation in debt-side financing in pursue of the commercial viability and development impact. In this report, we will be analysing the project’s major risks that are expected to arise in the future, as well as assessing the
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Alusaf Hillside Project 1. Is primary aluminum production an attractive industry? Why or why not? I consider primary aluminum production is not an attractive industry because : a. The product is identical (ie, aluminum), all the companies procure the same resources to make production with same production line and process. The firms only differentiate in terms of controlling and lowering the variable cost in order to make a profit as a price-takers. Pricing is somehow fix in global level
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CASO: FUNDICION DE ALUMINIO EN SUDAFRICA: PROYECTO HILLSIDE DE ALUSAF | | * La oferta esta subiendo en gran magnitud por el entorno industrial con las productoras de aluminio Rusas esta oferta creciente esta causando que los precios del mercado de aluminio bajen. * Por lo tanto a medida que el precio baja menos empresas pueden seguir produciendo ya que estas no pueden cubrir sus costos variables. Lo que causa que baje la oferta. * De otra forma se puede decir que a medida que el
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agreement with the South African government, • established a special liaison commiMee to shepherd the Mozal project. The Mozal Project Chart Gencor/Alusaf ($125mln) Equity IDC ($125mln) Other equity partner ($250mln) IFC ($65mln) Mozal Project JV total $1,4 bln. Subordinated Debt Other
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Financing the Mozal Project Li Hongru, Ji Bian & Frantz Moudoute Analysis of an Project Finance case in Mozambique The University of Hong Kong, MBA Class of 2016 Summary Summary ........................................................................................................................................ 2 The Mozal project – Presentation ........................................................................................... 3 Project Financing – Definition ....
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1993 Operating Cost of Aluminum plants worldwide (contains no depreciation or other charge for capital) ($/ton except where noted) Smelter Country Company Capacity (tpy) Electricity usage (kWh/t) Electricity price ($/kWh) Electricity cost ($/ton): Alumina usage (t/t Al) Alumina price ($/t Alumina) Alumina cost ($/ton): Other raw materials ($/ton) Plant power and fuel ($/ton) Consumables ($/ton) Maintenance ($/ton) Labor ($/ton) Freight ($/ton) General and administrative ($/ton) Marginal cost Total
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