Industry analysts speculated that even though Pechiney's proposed smelter development at Coega was based on a good business plan, there was no telling what would happen if the company's management were to change.

Pechiney going into Coega would provide an anchor that would attract future investments to South Africa's industrial development zones.

However, now that Alcan, which is based in Canada, has bid for Pechiney, there are fears that the deal might not come to fruition and there are - at least in the public domain - no other major anchor tenants in the offing.

Coega Development Corporation (CDC) spokesperson Ray Hartle said: "It is business as normal for Coega."
Pechiney spokesperson Chrystele Ivins said she could not "answer for the future, but for now nothing is changing in Pechiney policy".

Pechiney's board would meet soon to review the proposal.

French-based Pechiney has been in negotiations with the CDC since May last year, when it announced that it had selected Coega instead of other locations, including Australia, as the preferred site for its new $1.6 billion state-of-the-art smelter.

Last month CDC chief executive Pepi Silinga said negotiations between the CDC and Pechiney were in their final stages and a deal could be expected soon.

He said the CDC was also engaged in a number of initiatives to market Coega as "the investment destination of choice" in South Africa. This included meeting potential investors in the vehicle and textile industries in Europe and elsewhere.

If the Coega smelter goes ahead, it will be the first to use Pechiney's new AP50 technology. This is cheaper to install, operates more productively and causes less pollution than existing plants.

The smelter will produce about 460 000 tons of aluminium a year, about a third of all the aluminium now produced in Africa.

Pechiney's investment is being facilitated by several state-run organisations.

A 25-year power contract has been signed with Eskom and R5.6 billion is being spent by the National Ports Authority, Eskom and the national and provincial governments to construct the industrial development zone's deep-water port and landside infrastructure.

A $600 million contract has been signed with Technip-Coflexip and Bateman to build the smelter.

Pechiney is expected to take a 35 percent to 45 percent stake in the smelter project. The state-owned Industrial Development Corporation and Eskom will take a combined 25 percent.

It is expected that the balance will be held by an empowerment consortium and another large aluminium producer.

World aluminium production is now at its highest level in more than three decades, after gains in Chinese supplies.

Alcan said it expected to complete the offer by late September or early October and that it needed at least 50 percent of Pechiney's shares to be tendered to the offer.

Internationally, the proposed deal was seen as signaling growing confidence that economies would rebound, investors said. - By Quentin Wray and Bloomberg.