The island’s bauxite and alumina industry is retaking its place on the world stage, while investors explore Jamaica’s other minerals.
“The star performer in Jamaica’s economy has been mining recently. When you talk about Jamaican mining, most people think of bauxite — the ore rich in the alumina that is turned into aluminum — but that is changing. We have just signed 27 exploratory mining licenses to look into gold, zinc and copper, and at expanding our limestone industry. There is a lot of potential within our mining sector,” said Minister of Transport and Mining Robert Montague.
“Today, mining is the principal growth engine for Jamaica’s drive to prosperity. It contributes over 50 percent of the economy’s growth, represented 2.7 percent of our gross domestic product in 2018, up from 2.1 percent in 2017, employs over 3,500 people and earned $1.2 billion in 2018,” he added.
While the country is a rich source of natural resources such as limestone, silica, marble, mineral fuels, gold and copper, the sector is still driven by the high-quality bauxite and alumina that continue to attract international investors more than 60 years after they first became major export products for Jamaica.
In 2016, for example, China’s Jiuquan Iron and Steel Company (JISCO) invested $299 million in the takeover of an alumina refinery. “Now, JISCO’s planned investment is going up to $6 billion, as it intends to build a special economic zone for downstream aluminum products,” said Diane Edwards, president of Jamaica Promotions Corp. (JAMPRO), the country’s investment and export promotion agency.
“Mining is not an intrinsically bad activity, in my opinion. However, it must be managed with the utmost responsibility,” stressed the minister, who said that the Jamaican government wants to continue sustainably expanding and developing its mining industry by further rejuvenating the bauxite and alumina sector, increasing diversification in the resources being mined and maximizing value-added areas of mining, among other things.
“As a result, there are many investment opportunities within mining. The mining leases of some older companies that are not being used are currently for sale and there are a lot of opportunities for prospective mining. Now is the time to come to Jamaica and invest,” stated Montague. “In addition, we see a big opportunity in the high volume of our limestone reserves. We have pharmaceutical- and food-grade limestone that is not found in many places,” said JAMPRO’s president.
Transforming bauxite and alumina
A key example of how Jamaican mining is progressing is Jamalco, a company focused on bauxite mining and alumina production that is a joint venture between global commodities trader Noble Group, which owns 55 percent, and Clarendon Alumina Production, which holds the other 45 percent and is publicly owned.
The venture was established by the pioneering mining company Alcoa in 1959 to extract bauxite. It began to export in 1963 from its own port facility and started refining alumina in 1972. Today, its refinery — which is located near to its mines and port in Clarendon in the south of Jamaica — has an alumina production capacity of over 1.4 million metric tons a year.
Austin Mooney, managing director of Jamalco, explained how important Jamaica is to the history of the global bauxite and alumina industries: “When I started working in the alumina business almost three decades ago, the whole sector was focused around the Americas and some of the refineries that were used as role models for the world were the plants here in Jamaica. The two companies that started the entire industry, Alcoa and Alcan, were based in North America and had facilities here that used best-in-class technology and equipment.”
“At that time, this was a tremendously profitable business with high growth,” added Richard Russell, Jamalco’s chief operations officer, “However, since 2009 there has been significant compression within the sector, many high-cost producers have left the market and the business today is driven more than ever by a company’s ability to produce at a low cost.”
Although the sector remained important to the country’s economy, Jamaica lost its position as the world’s leading bauxite and alumina producer, with buyers turning to cheaper supplies in Australia and the Middle East. However, it seems the tide could be turning back toward Jamaica, with both industry experts and investors predicting a revival of the country’s fortunes in the sector. “Yes, this is a cost-driven business and, if you are not vigilant with expenditure, you can quickly find yourself becoming uncompetitive. Nonetheless, plans can be changed and, if you are high on the cost curve for one particular decade, that does not necessarily mean that you have to stay high on the cost curve — it is possible to transform your business,” said Mooney.
Jamalco’s own transformation started in 2014, when Noble Group acquired 55 percent of the company’s shares from Alcoa and introduced a new competitive advantage to the Jamaican firm.
According to Mooney: “Noble is a global trading company and it has been able to use its widespread trading network to derive substantial value for the alumina we make here. It is very agile in how it markets our alumina and adapts very quickly to changing situations. I believe that the future of the alumina industry will be that companies can not just be producers — they will have to be both producers and traders, and equally good at both. Jamalco has the manufacturing capacity and Noble has the trading know-how — it is a recipe for success and we work together very well.”
Retaining global competitiveness
The rejuvenated Jamalco is committed to growing returns for its shareowners, employees, customers, suppliers and Jamaica as a whole by consistently delivering world-class products and remaining competitive in the global market. It also aims to lead the way in terms of environmental performance, energy efficiency and safety standards.
An obvious way for the company to remain globally competitive involved transforming its energy supply. “One of our big challenges was to find an energy solution that gives us a long-term, stable and consistent supply of energy, which represents around 40 percent of the total cost of running Jamalco. The government has been working tirelessly to create the opportunity for us to change our energy supply,” said Russell.
As well as cost and reliability, the environment was a factor in the company wanting to move away from the heavy fuel oils it currently uses to supply its energy. “In all our operations, we have to balance environmental concerns with the fact that we need development within the industry. That is a challenge that we need to positively mitigate to make sure that we maximize our resource while caring for the environment at the same time,” said Jamalco’s chief financial officer, Andrew Williams.
The solution should come online in the first part of this year: a groundbreaking power plant based on liquefied natural gas that is being installed by New Fortress Energy. This will provide Jamalco with 120,000 pounds of steam as well as adding a further 90-100 MW of power to the nation’s energy grid. “The new plant will be able to give us 40 percent of the energy we require and we will have the benefit of an agreement with New Fortress that allows us to lock in a low-cost steam supply. Additionally, it is installing the infrastructure for natural-gas supply and distribution to Jamaica, which means we will be provided with lower-cost and cleaner gas in the future,” Mooney stated.
Jamalco also aims to modernize its production systems in order to remain competitive. “We have always been interested in automation and artificial intelligence within our production. Knowledge transfer on top of investment from Japan, for example, would enable Jamaica to raise its practices in order to bolster our capacity to remain competitive in the world and be at the cutting edge of the industry,” Williams pointed out.
The biggest need for automation is on the maintenance side of the company’s business, according to Mooney: “The maintenance work carried out here is physically very demanding and there is a trend toward automation in this area. From a safety point of view, an efficiency point of view and an environmental point of view, this is the best avenue for our industry to explore.” Another area where Jamalco already has some experience of automation is process computing. “Putting more processes that are essential for running our business in the hands of computers frees up employee time spent on repetitive tasks,” explained Russell.
The Jamaican company sees itself as a partner for sustainable national development and social responsibility is high on its list of priorities. “We have a substantial footprint when it comes to the amount of people we employ from the areas surrounding our operations and the establishment of many businesses that provide countless services to us is linked to our existence as well,” stated Williams.
In addition, Jamalco runs a comprehensive corporate social responsibility program that includes initiatives for education, career advancement, entrepreneurial development and health. “In order for us to be successful, we must ensure that the communities that surround us give us their support and we work very hard to maintain that. It is an important part of what we do in our day-to-day work,” said Mooney. He is optimistic about Jamalco’s future and the mining sector in Jamaica: “Aluminum is a critical material for the world — it is lightweight, strong and has many applications. Jamaica has bauxite reserves that will allow us to mine here for another 30 to 40 years.”