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 FRIGUIA
Manager:
Mr Leonard Jacob, General Manager
Read our exclusive interview
Contact:
Headquarters:
BP 334 - Conakry - GUINEE
Tel.: (224) 45 31 13
Fax: (224) 41 37 63
Factory:
BP 554 - Conakry - GUINEE
Tel (224) 41 50 88 / 24 03 03 / 24 04 03
Fax: (224) 41 34 27
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Strategy
Interview with
Mr. Leonard Jacob,
General Manager
Q : Can you give us a brief introduction to your company and explain the changes you have encountered since you took up your position?
A : The company has been in existence since 1960. That is when industrial activities got started, so we have been in operation for nearly 40 years. The original shareholders were American, Swiss, French, and German. Olin Mathieson was the leading shareholder together with Pechiney. The latter, however, has been the dominant private partner ever since the beginning, and they still own 30% of the private interests. Pechiney has provided the basic technology for the plant, plus technical assistance over the years.
If FRIGUIA has an image and a flavor, it is certainly a French one, imposed however on a basic Guinean culture. Still the company has gone through a number of transformations over the years. It was originally a private company, but became a mixed economy company (societe d’economie mixte) in 1973. Now we are undergoing a further restructuring process, which reflects transformations throughout the entire mining industry of Guinea. The idea is that the two major shareholders (the State with 49% and private investors with 51%) will change their status. The Government will reduce its shareholdings to around 15%, whereas the private partners will become direct investors instead of investing through the 51% consortium. The company that is now the consortium, called Frialco, will be liquidated. Thus if the individual partners - Pechiney, Alcan, Noranda and Norsk Hydro - decide they want to stay with the project, they will become direct shareholders in the company, and not though the Frialco holding. That process is ongoing now, but it has been a difficult one, and is still not completed. We are putting together new bylaws for the corporation, a new basic agreement and a new understanding among the shareholders, all of which we expect will be completed over the next six months.
Q : You were asked to take over as interim General Manager for the restructuring process…
A : I was asked to take over as interim General Manager at the end of December 1997, but at our latest board meeting I was appointed General Manager on a permanent basis. The original idea was to have an interim structure without the direct involvement of the Board of Directors. What was wanted was a smaller team that would make the whole process moves forward more expeditiously. The result was the creation of a crisis committee which existed until June 98. It was an offshoot of the Board of Directors. Its main mission was to put together the transformation process by formulating the documents that would be necessary to create a new FRIGUIA under Guinean corporate law. We haven’t totally succeeded yet, but we are getting there.
Q : FRIGUIA has been a strong element in the economic development of this country, with exports depending highly on FRIGUIA’s production of bauxite and alumina. Can you give us a better insight into this particular aspect ?
A : FRIGUIA is the oldest of the industrial operations in Guinea, dating back to 1960. We have never exported bauxite, but always alumina, which of course is the first transformation step in producing aluminum metal. I think it has probably been the pillar of the industrial activity in the country ever since its inception. Production in the beginning was quite important, but now after 40 years the alumina plant is considered small by world standards since we only have a nominal capacity of 640,000 tons of alumina per year.
When FRIGUIA was first developed, Guinea was undergoing its new life as a fully independent country, and there was not much in the way of infrastructures after the French pulled out. In addition, there were very few trained engineers or experts in Guinea. It was certainly a difficult period for the country, but FRIGUIA survived. The company was very much in focus, and was much sought after by the government to provide help to and models for different kinds of investment and industrial activity. There was constant contact between FRIGUIA, the government and the people of Guinea, and the company had to complement the limited social and industrial infrastructure. Thus, FRIGUIA had to do everything on its own until the Compagnie des Bauxites de Guinée came along ten years later to help spread the risk. FRIGUIA is still very visible and well known, and is looked to by the population for stability, employment and leadership in the industrial sector.
Q: For years the company has been very well known in Guinea, but what is your visibility abroad, your international ranking and how are you placed vis-a-vis your competitors?
A: The aluminum industry has developed tremendously in the last 40 years. The major players in the bauxite and aluminum industry, particularly in the alumina sector, are countries such as Jamaica, Australia and Brazil which have huge resources, and where investments have been focused over the past 20 to 30 years. The size of these new plants and the technology that has gone into them are very different from what we have here. So they have a strong competitive edge. For instance, the average traditional unit size of an alumina plant today is 1,300,000 tons/year, but we only produce half of that. Thus we don’t have the economies of scale that Australia, for instance, has developed. But we have relatively easy bauxite to treat, and we are relatively close to the coast. Thus we think that we can be very competitive although we still have much to do to guarantee that competitiveness. Our plant is old, and the technology is not totally up to date. So it needs a lot of upkeep and attention. We are trying to do that on limited budget and at a time when the partners are still in discussions over the future, which is not particularly easy.
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We have the Cameroon market, and we are developing market links with Nigeria. If we get fully modernized, we also hope to establish an outlet in Ghana. And we are not that far from European smelters, so we do have some advantages going for us, even though we do not yet have the economies of scale. However, we do have a guaranteed market since all the alumina is taken by the private partners under long term contracts. That is an important element of stability which allows FRIGUIA to remain a world player.
Q : You have an older plant that needs to be taken care of, although you have a limited budget to make improvements. Are you looking for other investors to help you out in technical aspects, or are your present partners ready to help you out to increase your production capacity?
A : We are looking to expand the shareholding base. We need to increase the capital of the corporation and we would like to find financing in the medium term for a modernization program and an upgrading of the existing facilities. We hope to find that financing soon and then to realize the program over a period of 4 to 5 years.
Our long term objective is to double the capacity of the plant and to reach the level of 1,300,000 tons of alumina per year. That takes a little more money, but has the advantage of being incremental to what we have already in hand. So the expansion could take without a massive investment. Thus we are optimistic that when we convert to our new privatization structure we will find new investors. It is true that some of the existing investors will drop out, but there are other investors who have shown an interest in FRIGUIA.
When the government reduces its shareholding from 49 % to 15 %, this automatically leaves the possibility of inviting new shareholders to participate… and we are full of hope that that will happen.
Q : But you are still in the talking process, so nothing has been settled yet ?
A: Well, nothing has been completely settled, but many contacts have been made with potential investors. Certainly the government has been very active in the entire process. SBC Warburg are consultants to the government, through the assistance of the World Bank, and they are making substantial efforts towards restructuring and privatization.
Q: You mentioned you have gone through bad and good periods. Last year the price of bauxite declined, how did it affect you and how do you forsee the future of the bauxite business?
A : The metal industry in general is a cyclical one, and aluminum has certainly been that way over the years. We are currently going through a difficult period with the price of metal below 1300 dollars / ton. How long will that last? We don’t know, but we expect that it will remain low until at least next year. Thus we anticipate that the price of aluminum, and consequently our export alumina, to decline over the next six months. Beyond that we can not predict anything very reliably.
Q: Are you trying to specialize in the production of any particular alumina ?
A: We produce a standard metalurgical grade of alumina with specifications that are within international standards. Thus our alumina can be traded and can enter almost all markets. While are within all specifications for grain size and impurities, we are trying to develop a low iron alumina which could be very useful for some high purity metal producers, such as VALCO in Ghana. But basically we turn out a standard metal grade product.
Q: What are your environmental standards, and what efforts have you made to become an environmentally friendly company?
A: We have certainly become more environmentally responsible over the years. The bauxite mines themselves are open pits. They are thin deposits on the surface, so you eat up large area over the years. Nevertheless we have a program of reforestation and another one to contain the waste from the alumina refining process. By and large we follow environmental standards that have been developed by the aluminum industry throughout the world. We are limiting emissions to atmosphere, and we certainly have programs for the destruction of toxic chemicals. In general, we are following international norms. We are not only looking after the environment, but also conscious of the health and the welfare of our workers.
Q: What is your last message to our American readers?
A: Guinea, in its recent evolution, has always respected the agreements it has signed. That does not mean that agreements haven’t been reopened for negotiations, but there is a great level of political stability compared to many of our African neighbors. I don’t think the progress here can always be compared with other countries, but still the potential is enormous, and various components of the national infrastructure are improving rapidly. It always takes courage to invest millions of dollars in industrial operations, but I think conditions here are sufficiently favorable, and the government intentions and plans sufficiently reliable to encourage such investment. People should appreciate the huge bauxite resources, and try to make a fair analysis of the investment opportunities here. You can invest in the bauxite industry in Australia or in other countries, but I think Guinea offers very fair opportunities and should be seriously considered. The country produces 25,000,000 tons of bauxite per year, but there is a serious potential for a great deal more. Guinea has the second largest bauxite deposits in the world, and in terms of current production it is right at the top together with Jamaica, Australia and Brazil.
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GUINEA
