The reserves are located mainly in the central provinces, Dung told the National Assembly in Hanoi today. Bauxite is refined into alumina, which is smelted into aluminum, the lightweight metal used in packaging, airplanes and construction.

Dung’s figure may make Vietnam’s reserves the world’s largest. The U.S. Geological Survey ranked Guinea as the top holder with 7.4 billion tons, while second-placed Australia has 6.2 billion tons, according to a January 2010 report that put third-placed Vietnam’s reserves at 2.1 billion tons.

“It’s generally recognized that there is a lot of bauxite in Vietnam, and it does hold great prospects for building an alumina-refining industry,” Alan Heap, global head of commodities research in Sydney for Citigroup Inc., said by phone.

Aluminum has gained 13 percent over the past year and traded today at $2,278 a ton on the London Metal Exchange. Prices may rise to $3,000 a ton in 18 months as China becomes a net importer, Harbor Intelligence said in a report this month.

Two Projects

Vietnam National Coal-Mineral Industries Group, the state- owned mining company known as Vinacomin, is developing two bauxite mines, one at Nhan Co in the central Dak Nong province with Aluminum Corp. of China Ltd., and the other in Tan Rai in neighboring Lam Dong province.

The Tan Rai mine may start producing commercial alumina by April, while Nhan Co will be in operation by the end of 2012, Dung said today. Duong Van Hoa, vice president of Vinacomin, had said in September that Tan Rai will produce 650,000 tons of alumina a year by late 2011.

The projects have been criticized by retired General Vo Nguyen Giap because of potential environmental damage and their use of Chinese labor. Giap, who led Vietnam’s victory over the French in the 1950s, wants work halted, according to a letter published by the VietnamNet online news service last year.

“The prime minister will reconsider the continuation of the projects after further assessments of the environmental safety issues,” Dung said. “Hungary’s experts have reported that the technology and sludge management in Tan Rai mine is modern and safe,” Dung also said.

A recent spill in Hungary of toxic sludge that was a byproduct of alumina production killed nine people. The torrent of toxic material was unleashed when a reservoir wall collapsed, and the red-colored flood eventually reached the Danube River.

By K. Oanh Ha & Nick Heath & Giang Nguyen - Bloomberg - November 24, 2010