Dennis Morrison, executive director in the Ministry of Development.

Jamaican bauxite officials last night were treating reports out of London of possible bids by two companies for its North American partner Alcoa as nothing but rumour, suggesting that for now it remains only an issue to watch.

Ownership changes in Alcoa would have likely implications for its multibillion-dollar expansion of the Jamalco refinery in Clarendon, which it co-owns with the Jamaican government.

"There is no hard information or basis on which to arrive at a position," said executive director of the Development Ministry and bauxite/alumina expert Dennis Morrison. "As far as Jamaica is concerned, it remains a hypothetical issue."

Alcoa is investing US$1.2 billion ($80 billion) to build capacity at the Clarendon-based refinery, a deal that would give it a majority stake in the plant.

The Times of London reported Tuesday that Australian firms BHP Billiton Ltd, the world's largest mining company, and Rio Tinto PLC, the world's second-largest iron ore producer, both based in Melbourne, Australia, are said to be considering separate bids of US$40 billion (euro30.7 billion) for Alcoa. The report cited unnamed sources.

The news sent Alcoa's shares soaring on Wall Street - up $2.00 at US$35 at 4:00 pm - despite scepticism in some areas of the market that the takeover would would occur.

Wire reports later downplayed the reports, quoting sources as saying Billington was not interested in a bid.

Morrison, citing news of Billington's denial, said before Jamaica could consider the implications and begin to strategise it had to be sure of which company was bidding, its character and likely intentions, "to see how it fits within Jamaica's policies and strategies."

The Alcoa stock rose as high as US$36.05 earlier in the day on the New York Stock Exchange.

The news also fueled market activity in Australia.

Officials with the mining companies declined to comment on the report Tuesday, as did Alcoa spokesman Kevin Lowery.

"We don't comment on rumours and market speculation," Lowery said. "It's not prudent to do so, nor is it productive."

Wall Street analyst Charles Bradford of Soleil-Bradford Research said he was sceptical of the Times report because "neither BHP or Rio Tinto have shown any interest in the downstream area of the business."

The downstream business refers to finished products manufactured from aluminum such as aerospace equipment and auto parts.

"There may be a theory out there that BHP would buy Alcoa and sell off all its downstream businesses, but I don't know who that buyer would be," Bradford said.

He has revised his Alcoa earnings forecast up 15 cents to US$3.20 a share for 2007, but said that was unrelated to the takeover speculation.

Bradford on Tuesday downgraded Alcoa stock to "hold" based on what he called the "possibly erroneous" report in the Times.

The Times said takeover speculation was fuelled by Alcoa's struggle to expand its business and a pending deal that would make Russia's OAO Rusal the world's largest aluminum producer, with about 12 per cent of the global output of aluminum.

The newspaper said neither BHP Billiton nor Rio Tinto had approached Alcoa about making a bid, and that BHP Billiton has already done the groundwork for a bid while Rio Tinto had not progressed as far.

Both companies recently reported company record earnings. BHP Billiton saw its net profit surge 41 per cent to a US$6.2 billion (euro4.7 billion) in the second half of last year, while Rio Tinto reported a profit for last year of US$7.44 billion (euro5.71 billion), up nearly 43 per cent.

Alcoa's market cap climbed above $30 billion on Tuesday.

Gleaner and wire reports