KUALA LUMPUR, Nov 22: A consortium of US, Chinese and Hong Kong investors is expected to invest 16 billion ringgit ($4.2 billion) to build an aluminium smelter in Malaysia, a business daily reported on Saturday.

Effectively the largest single foreign direct investment in the country, the smelting plant is slated to be completed within the next three years in the southern state of Johor and begin operations by 2009, the Business Times said.

Negotiations between the consortium and state investment arm Johor Corp were expected to be finalised by the year-end, clearing the way for work on the project to begin early next year.

Talks have been under way since two months ago, and we are upbeat about signing a deal soon with the consortium. It all goes well, the mega project will begin next year and be operational either in 2008 or 2009, Johor Corp chief executive Muhammad Ali Hashim was quoted by the newspaper as saying.

He said the consortium had also obtained approval from the government to build a 1,050-megawatt power plant at a cost of 2.2 billion ringgit to support the smelter. Muhammad Ali did not disclose the smelter’s capacity or name the investors.

The Business Times said the investors were initially interested in investing in another aluminium smelter in northern Perak state, but that deal fell through before work on the project, scheduled for September, could begin. The failed project was expected to be able to produce up to 820,000 tonnes of aluminium a year.

Analysts said the project could trigger a glut in aluminium supply in coming years especially since Malaysia had also planned to build a $2.0 billion aluminium smelter in the eastern state of Sarawak on Borneo island.

Smelter production from the Sarawak plant, slated to start in September 2007, would ramp up in stages to an eventual 500,000 tons annually. —Reuters