Alcan Inc. (TSX: AL) said on Monday it will develop a $7 billion project to build, with Saudi Arabian mining company Ma’aden, what would be one of the largest integrated aluminum-making operations in the world.

Alcan, already the world’s second-largest maker of primary aluminum, would hold a 49-per cent stake in the project, which would comprise 1,400 megawatts of power generation, a 720,000-tonne aluminum smelter and 1.6 million-tonne alumina refinery.

It would draw on a 90-million-tonne bauxite reserve in Az Zabirah in northern Saudi Arabia, which represents 30 years of mining, Alcan said.

Ma’aden will own the other 51 per cent of the project and Alcan will provide technology and operational support. Ma’aden is a Saudi Arabian joint stock company formed in March 1997 and wholly owned by the Saudi Government.

The next step in the project is completion of the joint venture agreement and preparation of financing, Alcan said.

The Canadian company, which days earlier had said it wants to tap what it sees as surging developing world demand for aluminum, said it expects the first metal to be poured in the first quarter of 2011, with the first alumina produced a year later.

Alumina is refined from bauxite and is the input, along with massive amounts of power, in making aluminum.

The smelter will initially be based on two potlines using AP36 technology, but will be designed to accommodate four more potlines that could increase annual capacity to more than 2 million tonnes, Alcan said.

Alcan Chief Executive Dick Evans said the project has “an ideal combination of competitive energy resources, local bauxite, well-developed infrastructure and favourable logistics.”

“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 in a statement.

Alcan said the alumina plant, aluminum smelter and power generation facilities would be located in the new Minerals Industrial City at Ras Az Zawr, on the east coast of Saudi Arabia.

At Alcan’s annual meeting Thursday, Evans had hinted that the company was mulling a number of undisclosed projects.

Alcan shares slipped 59 cents at $65.93 on the Toronto Stock Exchange, and 12 cents at $59.39 (U.S.) on the New York Stock Exchange Monday morning.

Alcan shares have risen some 32 per cent over the past six months, largely on higher profits. There has been intermittent speculation that the widely-held company may become a takeover target.

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