Norsk Hydro: Alunorte to resume production at half capacity

The Alunorte alumina refinery has on October 8 agreed with the environmental agency of the state of Pará, SEMAS, to resume production at 50 percent capacity under SEMAS’ supervision. This follows the exceptional authorization by federal environmental agency IBAMA late on Friday to utilize the state-of-the-art press filter technology to process bauxite residues. Alunorte is expected to be able to ramp up to 50 percent production within two weeks.

"With firm documentation verifying the integrity of our bauxite residue disposal system when based on our press filter, and in alignment with SEMAS, we are now in a position to safely resume 50 percent operations at Alunorte,” said John Thuestad, head of Hydro’s Bauxite and Alumina business area, adding: "This is a highly welcome development to secure thousands of jobs in Pará, as well as securing supply to our global customers and markets.”

Alunorte has been operating at half capacity since March after state environmental authorities and the court ordered the alumina refinery to reduce production by 50%, federal environmental authorities ordered to stop commissioning of the new bauxite residue area (DRS2) and the press filter and the court also ordered to stop commissioning of the DRS2.

As a consequence, Alunorte has been limited to disposing bauxite residue in the old DRS1 disposal area using less efficient drum filters. Last week, external geotechnical experts recommended that the use of DRS1 based on drum filter processing should be discontinued. DRS1 is already in the process being reshaped as a first step for the area to be closed and rehabilitated. By using the press filter technology for the reshaping process, Alunorte is able to safely continue depositing bauxite residue in DRS1 while awaiting approval to use DRS2. The new press filter creates stackable residue with considerably less water content than the drum filter.

In addition to Alunorte resuming operations at half capacity, the decision will allow Hydro’s Paragominas bauxite mine to restart deliveries to Alunorte at 50 percent capacity. Hydro’s joint-venture smelter Albras, situated next to Alunorte and fully dependent on alumina supplies from the refinery, will be able to continue producing 230 000 tonnes per year, half of its annual capacity of 460 000 tonnes.

Hydro continues its dialog with all relevant authorities to bring Alunorte back to full production and normalize its operations in Brazil.

Background 
On February 16–17, the city of Barcarena, including Alunorte alumina refinery, was hit by an extreme rainfall, which continued in the following days. The rainfall caused flooding in the region.  

Internal and external reviews confirm that there was no overflow from the bauxite residue deposits or harmful spills from the February rain event.  

Since March 1, Alunorte has been operating at 50% of its capacity, following orders from SEMAS and the court system. Consequently, Paragominas bauxite mine and Albras aluminium plant have also reduced production by 50%.  

Both Alunorte and Paragominas have granted collective vacations to around 1,000 employees to preserve jobs and mitigate the impacts of the reduced activity. In July, Paragominas temporarily suspended work contracts for 80 employees and terminated 175 contractors. 

On September 5, Alunorte signed two agreements representing a milestone to resume normal operations. The agreements include a technical Term of Adjusted Conduct (TAC) signed between Alunorte – Alumina do Norte do Brasil S.A, Norsk Hydro do Brasil Ltda, the Ministério Público Federal (MPF), the Pará State Ministério Público (MPPA), the State Government of Pará, represented by the Secretariat of State of Environment and Sustainability (SEMAS). In addition, a social Term of Commitment (TC) was signed between Alunorte - Alumina do Norte do Brasil S.A and the State Government of Pará. The TAC regulates certain technical improvements, audits, studies and payments for food cards to families living in the hydrographic area of the Murucupi River, while the TC addresses additional efforts and investments related to the social development of communities in Barcarena.

Investor contacts
Stian Hasle
+47 97736022
Stian.Hasle@hydro.com

Olena Lepikhina
+47 96853035
Olena.Lepikhina@hydro.com

Media contact
Halvor Molland  
+47 92979797
Halvor.Molland@hydro.com

Cautionary note
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of Inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been correct.  Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act