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Alcan Inc. is warning of a 20- to 25-per-cent boost in the $1.5-billion (U.S.) cost of expanding and upgrading the Gove alumina refinery in northern Australia, citing "tight" construction market conditions.

The startup is still expected in the first quarter of 2007, consistent with the original 27-month schedule, Montreal-based Alcan said Friday.

"The overall financial return on the Gove expansion and upgrade remain highly attractive," said Jacynthe Cote, CEO of Alcan Bauxite and Alumina.

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"The project has been impacted by extremely tight construction market conditions in Australia, as well as additional integration work necessary as the expansion neared completion,"

But Mr. Cote said those impacts have been more than offset by a favourable shift in aluminum markets.

The project will increase the refinery's capacity from about two million tonnes a year to 3.8-million tonnes, bring Alcan's internal alumina production capacity into balance and reduce cash costs by about $30 a tonne.

Early in the project, Alcan used a pre-assembled module strategy in which most plant components were fabricated in low-cost countries and shipped to Gove for installation.

In early trading Friday on the Toronto stock market, Alcan shares were up five cents at $4.02 (Canadian).

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