Alumina Limited

Alumina Limited recorded a net loss after tax of $150 million; excluding significant items, net loss after tax was $92 million. AWAC reported EBITDA of $165 million, or $210 million excluding significant items, and a loss after tax of $172 million excluding significant items. AWAC cash flow from operations was negative $10 million. Alumina production in 2023 was 10.3 million tonnes, about 1.5 million tonnes lower than 2022, and AWAC cash cost of production averaged $308 per tonne, up $4 per tonne. Looking to 2024, AWAC expects alumina production of about 9.4 million tonnes, shipments of 12.4 million to 12.7 million tonnes, aluminium production of around 161,000 tonnes, total third-party bauxite shipments of about 7 million tonnes, capital expenditure of approximately $360 million, and Kwinana-related cash outlays of about $130 million. Management also said 2024 would see a modest improvement in cash cost, with no tax payments related to the prior year.

Mike Ferraro framed the proposed Alcoa transaction as a strategic reset that gives Alumina shareholders direct exposure to a vertically integrated aluminum chain instead of a minority interest in the AWAC JV. He said the deal was judged on long-term value, NPV and other valuation metrics, not just near-term multiples, and repeatedly emphasized that the timing and relative valuations now made sense. His tone was cautiously upbeat on operations, pointing to WA mine-plan approval, Kwinana curtailment, and San Ciprian action as milestones that should improve AWAC’s quality and future performance.

Galina Kraeva focused on the earnings drag from lower production and higher fixed-cost absorption, especially at Kwinana, San Ciprian, and Wagerup. She said AWAC’s 2023 cash cost of production averaged $308 per tonne, with lower bauxite grades, maintenance, and inventory timing offset partly by lower energy costs at San Ciprian and Alumar. She also laid out 2024 guidance: about $360 million of capex, about $130 million of Kwinana curtailment cash outlays, a 9.4 million tonne production outlook, and a modest cost improvement as caustic and energy benefits are offset by lower-grade bauxite and seasonal maintenance.

Analysts pressed on whether the Alcoa deal price was a bit light, asking about NAV, tax synergies, and whether the transaction reflected AWAC’s cash needs. Management said they had done extensive long-term valuation work, believed the share exchange was largely aligned on value, and chose Alcoa shares because they saw more upside for shareholders in the combined, integrated company. They also said the deal was not driven by immediate balance-sheet pressure, though they acknowledged 2024 would be a cash-consuming year and that spot purchases to cover shortfalls would be largely a wash economically.