1. The Government of Ghana has propositioned the Chinese for $2 billion to set up an integrated bauxite to alumina value chain in Ghana.

2. Let us assume that if they get this money they shall invest $1.4 billion through Sinohydro, a Chinese contractor, to develop rail, refining and related infrastructure, thereby adding about 2.5 million tonnes of gibbsitic bauxite production and refining capacity. Let’s assume they shall keep $600 million as working capital.

3. 2.5 Million tons of bauxite = 900,000 tonnes of alumina. Note: a 900,000 ton alumina refinery could cost $800 million on its own, leaving $600 million for investment into the actual mining operations and transport infrastructure (rail lines, rolling stock and/or access roads and mega-trucks etc.)

4. Production cost of alumina in the hypothesized value chain = $320 million.

5. Realised price of alumina (three-year historic average) – $550. Realised revenues for two years: $1B. Cost breakdown: $640m (production), $110m (GSA), Loan Servicing (at 8% nominal) x 2yrs ($320m). Net margin: -$70m.

6. These ballpark calculations strongly suggest that below an alumina price of $600, the integrated project has a high risk of unprofitability. For most of 2017, the price of alumina on the world market hovered under $350 before a massive surge to $700. It broke the $800 a few months ago but the stable trend has been in the mid $400s. This analysis is therefore considerably optimistic.

7. Creative ideas are seriously needed to improve the viability of the project.