Alumina Limited looks positive after a 35% share price surge

Alumina's primary source of income is in the form of dividends received from its investment in AWAC. The past few years have been anything but pleasant for shareholders in Alumina. In 2008 the company earned A$202 million, however in the years since then the returns have been US$300,000, US$36.7 million, US$128 million, a loss of US$62 million and a loss of US$500,000 respectively.

Dividends have been equally as volatile, ranging from as high as 12 cents per share to as low as zero.

With the share price having gained 35% in the past 6 months - compared with just 3% from the S&P/ASX 200 Index, it appears Alumina has started to find favour with investors.

AWAC operates in the areas of bauxite mining, alumina refining and aluminium smelting -the company is obviously beholden to the global traded prices of these commodities. Despite ongoing challenges in the market for these commodities, Alumina just experienced its best quarter since 2011 with income up 59% in the recent March quarter.

AWAC has been busy boosting the efficiency of its operations with productivity improvements, cost controls and the closure of the Point Henry aluminium smelter in Geelong, Victoria. These moves have had a positive effect on the bottom line.

With a solid balance sheet with debts under control, cash on hand of $665 million and a focus on value added aluminium production after a number of years in the wilderness, Alumina is starting to look appealing.