KUALA LUMPUR: Sumatec Resources Bhd has bought into the proposed development of a one-million-tonne-per-year aluminium smelter in Gebeng Industrial Area, Pahang.

Sumatec said yesterday its subsidiary Destaman Sdn Bhd had signed an agreement to acquire a 60% stake in Jabat Yakin Aluminium Sdn Bhd from Datuk Shaiful Nizam Chung Abdullah for RM1.02 million.

It said the group had traditionally been involved in engineering, procurement, construction and commissioning (EPCC) in the oil and gas industry and had always been looking for other core business which could generate long-term revenue and income stream.

Jabat Yakin proposes to develop the smelter on a 1,000-acre plot in Gebeng. It has a licence to operate the plant with pioneer status for five years.

On Dec 15, 2005, Jabat Yakin signed an EPCC contract framework agreement with CITIC International Cooperation Co Ltd (CITIC) and China Aluminium International Engineering Corporation Ltd (CHALIECO).

Under the agreement, CITIC/CHALIECO would carry out definitive feasibility study, engineering design, supply and installation of process equipment, testing and commissioning of the whole plant, including training of Malaysian operation and maintenance personnel.

CITIC/CHALIECO would also arrange for up to 85% financing cost of the EPCC contract amount through export buyer乫s credit.

Sumatec said the demand outlook for aluminium was positive, given the sustained high demand from China with an annualised growth rate of 13% between 1989 and 2005, Southeast Asia (8% per annum), India (5%), and the Middle East and Africa (5%).

It said aluminium prices had been trading at historical highs due to the demand from China and the aerospace industry and analysts expected the metal乫s prices to ease from the current US$2,800 level to US$1,900 within the next three years as new smelting capacity was commissioned to meet the annual increase in world consumption of one million tonnes per annum.

Sumatec said smelters in the US and Europe were expected to close due to rising energy costs, and move their production to places with cheaper sources of energy, such as the Middle East, southern Africa, Russia, Latin America and Indonesia.

It said the annual demand for aluminium in Malaysia was about two million tonnes. Sumatec said the Gebeng development may be undertaken in three stages, with initial production capacity at 350,000 tonnes of aluminium ingot per annum and energy requirement of at least 500MW.