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AWC, ALUMINA LIMITED
nipper
post Posted: Oct 4 2018, 01:02 PM
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In Reply To: nipper's post @ Oct 4 2018, 08:49 AM

QUOTE
Overnight, Norsk Hydro said its Alunorte alumina refinery in Brazil, which was already half shut in after an environmental dispute, would be fully curtailed because a bauxite residue area was reaching capacity.

Alumina shares surged 25 cents, or 9 per cent, to $3.04, their highest since late 2008.

South32, which has less exposure to alumina, jumped 26c, or 6.6 per cent, to $4.22 - the highest since it was spun out of BHP at $2 a share in 2015.

“A full curtailment means about 6.6 million tonnes a year, or 5 per cent of global supply, will be removed from the market indefinitely,” UBS analyst Glyn Lawcock said.

Alumina prices had been riding high earlier this year because of the 50 per cent outage at Alunorte, leading to UBS to boost its 2018 average forecast to 14 per cent to $US510 a tonne. But spot prices had fallen 29 per cent in the past two weeks to $US457 a tonne because of a softening after the US said contracts in place before trade sanctions were announced would be honoured and after a strike at WA refineries owned by Alcoa and Alumina ended last week.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Oct 4 2018, 08:49 AM
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The aluminium market risks being thrown back into turmoil after the world's largest refinery of a key raw material shut down.

Norsk Hydro said it will temporarily close the Alunorte alumina refinery in Brazil because the only area it can use for waste processing is already close to reaching its capacity. An alleged dam spill led to a series of legal troubles for the company, prompting authorities to order that it operate at 50 per cent of capacity in late February. A prosecutor said on Friday it may take at least a year for the company to gain approval to return to normal production.

The stoppage will increase the scarcity of alumina - a key ingredient for producing aluminium - and raise the possibility of higher metal prices filtering through the global supply chain, which would affect manufacturers like automakers and canned drink suppliers. The market has been tight for months due to US sanctions on Russia's United Co Rusal...
spot market for alumina up 25% this year.. .. benefit?



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jan 25 2018, 07:41 PM
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Finally, AWC coming into its own
QUOTE
In 2016, under pressure from its shareholders, and Elliott Management in particular, Alcoa Inc decided to abandon its historical integrated structure by demerging its upstream activities, renaming its faster-growing value-added manufacturing businesses Arconic. AWAC went with the demerged entity, Alcoa Corp.

Alumina Ltd, which pre-demerger had a very limited influence over AWAC and was effectively within Alcoa's control, seized the moment to threaten to derail the demerger and ultimately successfully renegotiated the joint venture agreement to increase its influence, to gain access to more cash from the vehicle more quickly, to gain more discretion as to how it deployed its excess cash and to unlock its own control premium.

The "new'' Alcoa is a pure-play focused on the upstream segment of the aluminium industry. While it doesn't appear to have been the major factor in the "old" Alcoa's decision to demerge, the distancing of the upstream and downstream elements of the value chain did reflect changes that had been developing and accelerating in the markets in the post-financial crisis period.

In the past the sector was dominated by big and completely integrated producers — AWAC's production was tied to Alcoa's raw metal requirements. The emergence of China as a major consumer and producer — now the major consumer and producer — however, saw the markets for alumina and bauxite start to separate from the market for aluminium.

Chinese and Middle Eastern aluminium producers as a group were long aluminium but short alumina so alumina prices, historically directly linked to aluminium prices, began diverging. Today more than 85 per cent of AWAC's alumina sales are priced by reference to an index rather than the aluminium price.

For a pure alumina and bauxite play, as Alcoa Corp now is, that's a good position to be in. It's even better given that, within AWAC and also within the non-AWAC elements of Alcoa, the past decade has seen enormous restructuring and rationalisation in response to the China-inspired overcapacity in the market for aluminium metal. AWAC is both a pure-play and one based on tier one high-quality and low-cost assets.

While its full-year result, unveiled last week, disappointed the market — its shares fell 7 per cent in response — given that its share price had nearly doubled since it was demerged the fall was inconsequential. Alumina shares have risen more than 40 per cent since the AWAC agreement was restructured.

Apart from the better focus and the clearer proposition for investors Alcoa has as a pure play, the timing of the demerger was fortuitous for Alcoa and Alumina. China has been increasingly concerned about the air quality in its cities and in the efficiency, or lack of it, within its industrial base. In the steel industry, that has seen a continuing restructuring and consolidation of the sector that has flowed through to rising demand (and prices) for higher quality raw materials.

There have been similar developments within China's aluminium industry, which represents about 55 per cent of global aluminium and alumina production and consumption. During the winter season in China when pollution is at its most severe — from November through to about the end of March — the government imposed domestic production cuts in both alumina and aluminium and is expected to do the same thing again late this year. Separately there have also been some permanent closures of capacity. Overall, aluminium and alumina capacity has been cut by more than 30 per cent in the regions targeted.

It's not surprising, in the circumstances, that prices have responded. The aluminium price rose more than 22 per cent last year and the alumina price 30 per cent. The current spot price for alumina is about 14 per cent higher than the average price realised by Alcoa last year.

If China remains focused on creating a cleaner and more productive industrial base, the fundamentals of the global aluminium sector will improve as excess and sub-economic Chinese capacity is withdrawn, which would be a positive for Alcoa — and Rio Tinto, incidentally — albeit not necessarily for the downstream manufacturers facing higher costs for their aluminium metal requirements.

A wildcard for the sector could be the Trump administration's trade policies, with measures to penalise steel and aluminium imports said to be on its agenda after the recent imposition of tariffs on washing machines and solar panels. That shouldn't be a threat for alumina and bauxite producers, like AWAC.

Alumina, thanks to the stance it took in 2016, provides a pure exposure to the purest (and largest) proportion of the Alcoa portfolio and access to the growing volumes of cash it is generating. As a result of the 2016 agreement, at least half the cash AWAC generates is distributed to the partners on a lagged quarterly basis.

If the current settings are sustained, shareholders are either going to showered with cash — the alumina and bauxite segment of Alcoa's earnings before interest, tax, depreciation and amortisation rose 111 per cent in the December quarter, to $US668 million — or attract the takeover premium that had been locked away by the old Alcoa until those 2016 renegotiations.
https://www.theaustralian.com.au/business/o...68ba62b3cfd72c6



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Sep 2 2016, 09:50 AM
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QUOTE
Alcoa has been trying to split itself into two smaller companies in recent months, but ASX listed Alumina Ltd has frustrated that process by claiming its joint venture agreement with the US company would give it first rights to Alcoa's stake in a joint venture named AWAC.

AWAC contains bauxite mines, alumina refineries and some aluminium smelters, and has been governed by a long standing, highly restrictive contract that rendered the Australian 40 per cent stakeholder largely powerless.

But with Alumina Ltd's legal action holding up Alcoa's split, the US company has agreed to revise the terms of the AWAC joint venture in a way that dramatically improves Alumina Ltd's end of the deal.

One aspect of the new deal could see Alumina Ltd more open to corporate activity, both as a target and as a predator.

The previous joint venture deal contained "exclusivity" clauses that prevented either partner from operating bauxite or alumina assets outside the joint venture. That aspect of the deal had reduced the chances of a takeover suitor emerging for Alumina Ltd in the past.

The new deal not only puts Alumina Ltd and its steady stream of US denominated dividends in play, it allows the company to pursue new projects that it might own outright or with other partners.

The greater freedom is set to come at a time when Rio Tinto is rumoured to be keen to sell its Australasian alumina refineries, as well as its struggling aluminium smelters.

The deal also allows for more financial flexibility around taking on debt given that Alumina Ltd will be working with a smaller and weaker partner.

The partners have also agreed to change the way earnings from the AWAC joint venture are distributed, and those earnings will flow quarterly rather than annually.

The existing arrangements see 30 per cent of AWAC's after tax operating income paid to each partner annually, but the new deal will allow for minimum 50 per cent of prior quarter's net profit. Any "surplus cash" will also be distributed quarterly,
could be time for another chart, cooderman - at very least a pennant breakout?



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: cooderman  early birds  
 
cooderman
post Posted: Oct 6 2015, 11:04 AM
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I have been watching this for a while, hoping it would find support on the Weekly. Will watch and see where it closes today
any big pullback on todays high would see me watching for a while longer
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Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Sep 28 2015, 09:50 PM
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In Reply To: Mookie's post @ Apr 28 2015, 12:40 AM

QUOTE
Aluminum giant Alcoa has announced plans to split itself into two publicly-traded companies. One company will be comprised of Alcoa's Global Primary Products (aluminum, bauxite, etc.). The other company, which for now is being referred to as the "Value-Add Company," will be an "innovator of high performance multi-material products." The transaction is expected to be completed in the second half of 2016.

- from the newswires.

so, how will this impact the locally listed outfit?: Alumina AWC is engaged in investing in bauxite mining, alumina refining and selected aluminum smelting operations, through its 40% ownership of Alcoa World Alumina and Chemicals (AWAC).



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 

sentifi.com

Share Cafe Sentifi Top themes and market attention on:


Mookie
post Posted: Apr 28 2015, 12:40 AM
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In Reply To: pillman's post @ Nov 8 2014, 07:03 AM

I found this article very interesting as i'm looking for commodities potentially entering boom periods and based on rapidly declining aluminium stockpiles aluminium might fit the bill. Zinc is similar although the zinc price has already started to move and aluminium has yet to embark on a substantial move.

Seems to have strong chart support around $1.60 so downside should be limited.

Article - http://www.sharecafe.com.au/greg_tolpigin....AV&ai=34414.


 
pillman
post Posted: Nov 8 2014, 07:03 AM
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In Reply To: pillman's post @ Sep 20 2014, 12:45 PM

. . . and here it is. Up again to 1.77. Lets hope it stays up

 
pillman
post Posted: Sep 20 2014, 12:45 PM
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In Reply To: hungry's post @ Apr 2 2014, 05:10 PM

Watching Alumina rise sharpely this past week and wondering when it will end. Combination of aussie dollar change, Aluminium price rise and "all the issues with the restructure are behind us". What is it's fair market value ? Morningstar is calling it at 2.60, others at 2.12 and even 1.20.

 
hungry
post Posted: Apr 2 2014, 05:10 PM
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In Reply To: hungry's post @ Apr 2 2014, 05:02 PM

After checking again, there's actually 2 articles - one FA and one TA.

Even better when both are bullish.




 
 


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