Century Aluminum Iceland has interesting assets and future growth plans

Century Aluminum has some interesting assets and future growth plans.

Century Aluminum Co has five main production facilities, one under construction and two carbon cathode/anode manufacturing facilities. The firms, a leading aluminum production facility, is located in Iceland and the new facility under construction is also located in Iceland.

Century Aluminum Co’s Icelandic facility is actually a jewel in the company’s crown. The plant cost $1 billion to construct but has generated sales in the region of $1 billion during the past two years. Moreover, the facility gets its power from geothermal and hydro power sources, which cuts costs and pushes the average cash cost per ton of aluminum produced to a level 17 percent below the cash cost per ton of production for the company’s U.S.-based facilities.

In addition, this relatively low cost aluminum production in Iceland allowed the company to realize profit margins of 20 percent per tonne of aluminum produced for its Icelandic facility, based on LME average sales figures. In comparison, Alcoa Inc only realized a 12 percent profit margin on its production per ton of aluminum produced during the quarter.

What’s more, Century Aluminum Co is in the process of upgrading its existing Icelandic plant, already its largest production facility, to increase production by 20 percent. Furthermore, as I have already mentioned, a new aluminum production facility is already under construction within Iceland, which should add an additionally 360k metric tonnes to company production when completed; a 35 percent increase from current levels. Another low-cost production facility in Iceland should boost Century’s standing as a globally competitive aluminum producer.

Unlike many other resource companies, Century Aluminum Co has a strong balance sheet and its current discount to book value offers some real value.

That said, earnings have been negative for four of the last five quarters and two of the last four years. Nonetheless, Century has been cash-flow-positive for two of the last four quarters and two of the last four years, which is consider to be more important and a more telling indicator of the company’s profitability. Century Aluminum’s low cost production and plans for expansion.