A departure from the bauxite production levy on Noranda Jamaica Bauxite Partners II in 2018 in favour of a profit-share agreement may have cost the Government about US$60 million in earnings, but Finance Minister Dr Nigel Clarke has cautioned against “inappropriate comparisons”.
Clarke told the Lower House on Tuesday that the bauxite profit-share agreement between the Government and Concord Resources Limited, which acquired New Day Aluminium (Jamaica) Limited’s 49 per cent of shares in the company, yielded US$20 million in revenues between 2018 and 2021.
New Day was the parent company of Noranda Jamaica Bauxite Partners II, which operated the St Ann Bauxite Company and Gramercy alumina refinery in Louisiana.
Clarke said the profit-share pact between the Government and New Day was in accordance with a binding letter of intent carrying over from 2016 between the parties.
He said the arrangement gave the Government the contractual right to receive a payment based on the greater of an annual amount (profit participation) from New Day calculated based on the consolidated profitability of New Day Aluminium LLC – a management entity that consolidates the earnings before for interest, taxes, depreciation, and amortisation (EBITDA) of Gramercy and the bauxite mined at St Ann Bauxite.
Clarke said that the profit participation was 17.33 per cent of EBITDA or US$1.50 per shipped dry metric ton of bauxite produced by St Ann Bauxite – whichever is greater.
Additionally, a royalty of US$0.50 per dry metric ton of bauxite shipped would go to the Government.
According to Clarke, New Day LLC was profitable from 2016 to 2017, resulting in the Government earning just over US$10 million.
He said, however, that in 2018, severe weather conditions adversely impacted Gramercy, resulting in New Day Aluminium declaring massive losses.
He said the losses continued until at least 2020.
“As a result of these losses, no amounts of profit share was collected,” the finance minister told Parliament, adding that the alternative of US$1.50 per shipped dry metric ton was called upon.
The Government earned from that just over US$6 million, while some US$9 million is still owed.