Alumina Limited reports net loss for 2016 full year, partly offset by improved bauxite sales

Alcoa's Australian partner Alumina Limited has reported full year result for 2016 and registered a loss of $US30.2 million ($A39.3 million) down from a $US88.3 million ($A114.8 million) profit in 2015. The loss is attributed to restructuring-related write-offs and lower prices and volumes.

Impairment charges related to shutting down capacity in its Alcoa World Alumina and Chemicals (AWAC) joint venture with metals giant Alcoa has also contributed to the loss. Alumina holds a 40 per cent stake in AWAC and the company had to pay a charge of $US115 million pertaining to the share which was partially offset by gains on the sale of the Dampier-Bunbury gas pipeline.

Commenting on the result, chief executive Peter Wasow said , "Net cash distributions from AWAC were higher than the previous year despite the tough market conditions in the first half."

"As a result of restructuring and productivity gains AWAC continues to keep cost of production low and prices have recovered significantly," he added.

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A fall in alumina margins because of lower prices in H1 2016 and lower volumes after curtailing capacity across its refineries had a negative effect on the AWAC joint venture. This was slightly offset by improved sales volume of bauxite ore to third parties.

Alumina Limited and Alcoa, the joint venture partners for AWAC have closed more than three million tonnes of refinery capacity globally in the past two years due to low alumina and aluminium prices. However, their three alumina refineries in Western Australia are spared from the curtailment.

In November 2016, Alcoa completed a split of its global operations into two independent, publicly traded companies, i.e. Alcoa Corporation and Arconic, with one focused on upstream mining and smelting and the other on aluminium products.

The split took place after both the partners had agreed to reshape their joint venture, allowing greater say to Alumina Limited. The company forecasts a steady improvement in alumina prices in 2017 and a demand and supply balance. Mr Wasow however, expects the cost pressures to continue throughout the year. He also expects to increase bauxite sales to third parties in 2017.

AWAC’s own mines produced 37.5 million BDT of in 2016, a drop of 0.5 million tons YOY, because of the closure of Suralco mine, and partly offset by increased production in Australia and Brazil. The Juruti mine in Brazil set an annual production record of 5.2 million tons. Including equity interests total bauxite production was 42.7 million tons in comparison to 43 million tons in 2015.

The average cost of bauxite produced by AWAC’s own mines dropped 24% to USD 9.8 per BDT from USD 12.8 per BDT in 2015.

Production of alumina was 12.6 million tons in 2016, compared to 15.1 million tons in 2015 and alumina shipment stood at 13.3 million compared to 15.5 million in 2015. The drop in production and shipment was largely due to the closure of Suralco and capacity cut in Point Comfort refineries.