Alcan Inc. (TSX:AL) and Saudi Arabian mining company Ma’aden have signed a “heads-of-agreement” deal to develop a US$7-billion aluminum “mine-to-metal” project in Saudi Arabia, including bauxite mining, alumina refining, power generation and aluminum smelting.

Montreal-based Alcan said Monday it will hold a 49 per cent stake in the project and provide technology and operating management support, with Ma’aden holding 51 per cent.

Ma’aden, owned by the Saudi government, was established in 1997 to promote the development of Saudi Arabia’s non-petroleum mineral resources and diversify the kingdom’s economy.

“This world-class project has an ideal combination of competitive energy resources, local bauxite, well-developed infrastructure and favourable logistics,” Alcan CEO Dick Evans said in a release.

“Consistent with Alcan’s primary metal strategy, this project has the potential to achieve one of the lowest operating costs in the industry and become one of the world’s largest smelters,” he added.

The agreement was signed in Riyadh in the presence of Ali Al-Naimi, Saudi Arabia’s minister of petroleum and mineral resources and chairman of Ma’aden, Abdullah Al-Dabbagh, CEO of Ma’aden, and Michel Jacques, CEO of Alcan’s primary metal group.

Ali Al-Naimi said the project “will be one of the largest, vertically integrated operations of its type in the world. The operation will promote economic growth within the Kingdom of Saudi Arabia, diversify the country’s economic and industrial base and create employment opportunities through opening up new sectors of economic activity.”

The initial operations feature a power plant delivering 1,400 megawatts; a 90-million-tonne bauxite reserve in Az Zabirah, northern Saudi Arabia, representing a potential 30 years of mining; an alumina refinery with a capacity of 1,600 thousand tonnes per year; and an aluminum smelter with a capacity of 720 thousand tonnes per year.

The alumina plant, aluminum smelter and power generation facilities would be built in the new Minerals Industrial City at Ras Az Zawr, on the east coast of Saudi Arabia. First metal production would be expected during the first quarter of 2011, and first alumina a year later.

The next steps will include completing a joint-venture agreement and pursuing project financing.

Alcan has 68,000 employees, including its joint ventures, in 61 countries and regions, and posted revenues of US$23.6 billion in 2006.

It shares traded at $66, down 52 cents, at the Toronto Stock Exchange.

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