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Center-right election win in Iceland may help Century Aluminum

Keywords: Tags  Century Aluminum, Michael Bless, Helguvik, Grundartangi, Iceland elections, smelter, power negotiations, aluminum Michael Cowden

CHICAGO — The parliamentary elections in Iceland may work to the advantage of Century Aluminum Co., according to both the company and analysts.

The center-right Independence and Progressive parties, which were in power when Iceland’s economy collapsed in 2008, beat the ruling coalition of Social Democrats and Left Green parties in the April 27 vote, according to media reports.

The victory of "pro-business parties" improved the prospects of the Monterey, Calif.-based aluminum producer’s greenfield aluminum reduction project in Helguvik, Iceland, Davenport & Co. LLC analysts Lloyd T. O’Carroll and John F. Ockerman said in a note to investors.

The first phase of the smelter, which remains on hold, would take 18 months to complete once a power deal is secured, meaning that the soonest the facility could come online would be 2015, the analysts said. They estimated the cost of the project at $600 million, with Century already having spent $150 million. Additional phases of the project would cost between $300 million and $350 million and take an additional 18 months.

But once complete, the 360,000-tonne-per-year smelter "would be one of the lowest-cost, most efficient smelters in the world," O’Carroll and Ockerman said.

Power discussions at Helguvik have progressed at a "slow pace" in recent months, Century president and chief executive officer Michael Bless said during a conference call. "This project is ready to commence; the only requirement is the completion of those power contracts and an assurance that transmission will be in place when the smelter is ready to produce. We’re hopeful that the environment, post-elections, will be conducive to getting this great project going again."

The Social Democrats and Left Green parties have platforms and philosophies "less friendly toward heavy industry" than those of the Independence and Progressive parties, Bless said. Following the elections, Century may find "the momentum we need ... to push a few things over the goal line."

Century’s Grundartangi smelter in Iceland, which has a rated capacity of 260,000 tonnes per year, is the company’s largest, most modern and lowest-cost smelter, according to Century’s website. The company "more than tripled the size" of Grundartangi under the watch of the parties that won in the recent elections, Bless said during the conference call.

Century’s first-quarter aluminum shipments totaled 158,776 tonnes—about 88,000 tonnes from U.S. facilities and 71,000 tonnes from Iceland—down 0.7 percent from 159,967 tonnes in the same period last year.

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