Alumina Limited

Alumina Limited recorded net loss after tax of $150 million, and net loss after tax excluding significant items of $92 million. AWAC in 2023 recorded EBITDA of $165 million and net loss after tax of $318 million; excluding significant items, EBITDA was $210 million and loss after tax was $172 million. AWAC cash flow from operations was negative $10 million. Alumina production in 2023 was 10.3 million tonnes, down by approximately 1.5 million tonnes versus 2022, and AWAC cash cost of production averaged $308 per tonne, up $4 per tonne year over year. For 2024, AWAC expects alumina production of approximately 9.4 million tonnes, alumina shipments of 12.4 million to 12.7 million tonnes, aluminium production of around 161,000 tonnes, third-party bauxite shipments of approximately 7 million tonnes, capital expenditure of about $360 million, and cash outlays related to Kwinana curtailment of approximately $130 million. Management said production costs should see a modest improvement in 2024, with first-half costs higher due to seasonal maintenance and Kwinana.

Mike Ferraro framed the Alcoa transaction as a logical long-term strategic combination that unifies ownership of AWAC and gives Alumina shareholders direct exposure to a fully integrated aluminium value chain. He stressed that the decision was based on long-term value, not just near-term multiples, and said the relative values of the two companies are now largely aligned. His tone was confident and supportive of the deal, while also emphasizing that 2023 was difficult and that the recent mine-plan approval, Kwinana curtailment, and San Ciprian actions improve the company’s path forward.

Galina Kraeva walked through the operating and financial bridge: AWAC EBITDA of $165 million, or $210 million excluding significant items, versus a $10 million negative cash flow from operations. She highlighted lower 2023 production of 10.3 million tonnes, average cash cost of $308 per tonne, and explained the cost pressure from lower bauxite grades, lower production, maintenance, and inventory timing, partly offset by lower energy costs. For 2024 she guided to about 9.4 million tonnes of alumina production, 12.4-12.7 million tonnes of shipments, a modest cost improvement, $360 million of capex, and about $130 million of Kwinana-related cash outlays, while noting the guidance is being reassessed as projects are in planning stages.

Analysts pressed management on why the transaction was done now, whether the share exchange reflected balance-sheet pressure or a need for cash, and whether a cash component was considered to release franking credits. Ferraro said the timing reflected relative value and strategic logic, not pressure from cash needs, and said a range of deal structures were discussed before landing on an all-share exchange. On funding and third-party purchases, management said the balance sheet has about $300 million of net debt against a $500 million facility, is comfortable for now, and that third-party alumina purchases and sales are essentially a wash on a net basis.