why hasn’t alcoa just walked away from mhm?, page-4

Hi Rod,

Good question.

This may have been posted before but many may not have seen it, I know I hadnt. It is a paper submitted to the Victorian Government regarding aluminium recycling (2011). I believe this paper along with the fact slag cannot be landfilled in australia answers your question.

Under Question 2; (I have separated the paragraph in question. I cannot highlight this ATM on this device.

Question 2
Are the categorisations, definitions and standards used to manage waste between and within the different levels of government effective and appropriate?
(This answer also applies to Question 9)
No.
There are major obstacles currently in place, particularly at state level, were large variations in policy and legislation make it near impossible to invest in large recycling capital.
Australia is a relative small economy with a small population and to be economically viable Australia can only afford one processing facility.
If this facility is based in NSW then a problem arises when in Victoria a material can be classified as a waste which can no longer be transported to NSW for processing and recovery. This is a current problem for AARP as we generate Salt Slag (classified as a waste in NSW), transport it to Victoria for further treatment but cannot bring the final waste back into NSW. This costs AARP up to $1.5m/year more in disposal fees which we must absorb even though no other economic technology currently exist.


AARP is currently working with a vendor Macquarie Harbor Mining to set up a plant in Victoria to process the waste from recycling aluminium.


Australia must have a national approach that assists the recycling industry so that we can invest and ensure the ongoing sustainability of recycling and waste recovery.

http://www.parliament.vic.gov.au/images/stories/documents/council/SCEP/CDL/Submissions/No_12_AARPRecycling.pdf

Note the 1.5million extra is disposal fees. This was back in 2011.

How much Slag does Alcoa provide to MHM? I dont have the figure handy but $1,500,000 divided by 40,000 (guess) is $37.50 more than 10% of the old tolling cost.

What you may also find interesting is that landfilling house waste is tipped to increase to between $200-$300 this year. This is for standard waste not toxic like salt slag.

Think about this basic scenario;

Before MHM

Say 40,000 tonnes of slag landfilled (while still permitted) @ $300 a tonne = $12,000,000 a year. This doesnt include any extra payments which companies make for the maintenance of landfill for toxic waste. This also is dead money as there is no return to Alcoa just a long term liability.

Suddenly MHM come along and we agree to process the slag for $300 a tonne AND you get to keep the recovered aluminium. (17% per tonne has been quoted. From my research i believe it is more like 5-10%) For argument sake lets say 10%. Aluminium price $1850 per tonne.

1850 x 75%(the estimate sale price for the concentrate) x 10% (recovered aluminium) = $138.75 per tonne of slag processed is recovered AL.

Suddenly at $300 a tonne (conservative est. for landfill) & previous tolling price $300 tonne (currently more under 12 month contract but unknown) ALCOA are $5,500,000 (40K x $138.75) better off. I believe thats a conservative estimate as landfill for slag would be far higher than domestic house waste.

Finally only 71% of Aluminium was recycled in 2011 giving a maximum upside of 29% to be processed and increase revenue not including increase in consumption.

All the figures above dont include Salts / Potash etc resale.

THATS WHY ALCOA NEED MHM!