Bauxite was chlorinated in molten salts using chlorine gas and carbon to produce Alcoa Electrolyte such as AlCl₃-NaCl-KCl melt. Chlorine gas was mildly introduced at 820°C into the suspension of bauxite and carbon powder in NaCl-KCl eutectics. AlCl₃-FeCl₃-NaCl-KCl melts are obtained without significant loss of AlCl₃, carbon and chlorine gas. Hematite in bauxite dissolves in molten NaCl-KCl salt. Chlorination of alumina is enhanced by ferric chloride. Selective chlorination of bauxite is performed with hydrogen chloride gas and carbon in NaCl-KCl salt bath to give FeCl₂ not FeCl₃. The selective chlorination to remove hematite as FeCl₃ is also achieved when a large amount of bauxite is introduced in a small amount of molten salt.