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Pará authorities to order 50% production cut at Alunorte

The Secretariat of Environment and Sustainability in the Brazilian state of Pará (SEMAS) issued a statement late on Monday stating it will order Norwegian aluminum company Norsk Hydro ASA’s alumina refinery Alunorte to cut production by 50 percent due to non-compliance with a resolution to achieve a freeboard of 1 meter in the bauxite residue deposit DRS1. In addition, SEMAS said it would order the Paragominas bauxite mine to suspend operations at one of two tailing dams at the plant.

SEMAS said it would formally notify the company on Tuesday, 27 February.

In the original resolution from Friday, 23 February, SEMAS ordered Alunorte to reduce the water level in the DRS1 deposit following extreme rainfall on 16-17 February that led to regional flooding.

“We have taken considerable measures to meet the deadline at Alunorte, and we will continue with full force to make sure that we comply with expectations and requirements,” says Hydro CEO Svein Richard Brandtzæg. “We will continue our dialog with local authorities to ensure that we take all necessary steps to ensure safe and sound operations – with respect for people, the environment and for the local communities that we are a part of,” Brandtzæg says.

While it is too early to determine the size and impact of the resolution, it could potentially have significant operational and financial consequences.

Measures implemented at Alunorte to comply with SEMAS’ resolution have led to continuous improvement in the average DRS1 freeboard – the distance between the top of the tailing dam and the water level.

The resolution by SEMAS came after Brazilian environment minister José Sarney Filho expressed similar concerns during a press conference on Monday evening local Brazilian time, calling on the Brazilian Institute of the Environment and Natural Resources (IBAMA) to implement any necessary mitigating actions to remedy the worries about a possible water contamination in the local area, including fines or a possible suspension of activities at Alunorte.

SEMAS also said it would introduce daily fines of around BRL 1 million until Alunorte reached a freeboard of at least 1 meter at DRS1.

Hydro owns 92.1 percent of the Alunorte alumina refinery and 100 percent in the Paragominas bauxite mine.

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 aluminum and aluminum 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.

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