Business

Sale of Jamalco part of global cuts being made by Alcoa

Friday, July 11, 2014    

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The plan by US-based Alcoa to divest its Jamaica operations forms part of its global transformation that will also see it slash production in Brazil and Australia, management indicated.

It aims to contain costs which at times exceed revenues at the global company.

"To further optimise the Alumina business, Alcoa signed a non-binding letter of intent to pursue a sale of its ownership stake in Alcoa Minerals of Jamaica (AMJ), which operates the Jamalco bauxite mining and alumina refining joint venture," stated Alcoa in its financials released to shareholders this week. "The above actions are consistent with the Company's goal of lowering its position on the world aluminum production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile, by 2016."

Jamalco is owned jointly by AMJ, which has 55 per cent stake in the Clarendon-based refinery, and the government-owned Clarendon Alumina Production, with 45 per cent. AMJ is part of the Alcoa World Alumina & Chemicals (AWAC) group of companies and is owned 60 per cent by Alcoa and 40 per cent by Alumina Ltd.

Alcoa will also reduce production in Brazil by 149,000 tonnes of smelting capacity and will in August close its Port Henry, Australia plant that produces 190,000 tonnes of aluminium. On the other hand, it will pump increased resources in its Saudi Arabia operations based on efficiencies in that locale.

"Our second quarter results prove Alcoa's transformation is in high gear,"stated Klaus Kleinfeld, Alcoa chairman and chief executive officer in his notice to shareholders this week. "We are taking the downstream business to new profitability heights, capturing midstream demand as auto lightweighting accelerates, while continuing to relentlessly improve upstream performance. Our strategy of building a lightweight multi-material innovation powerhouse and a highly competitive commodities business is driving compelling and sustainable shareholder value."

The company made a profit of US$129 million in its June quarter compared to a US$148 million loss a year earlier.

Alcoa announced its decision to sell Jamalco in June to Noble Resources UK Limited. The company however added that it would retain a minority interest in AMJ and serve as Jamalco's managing operator for at least two years. Noble owns coal reserves which on the surface could be used to reduce high energy costs.

Alcoa entered the island some 50-years ago having built its refinery at Halse Hall, Clarendon in 1973 which shipped unprocessed bauxite. Alcoa's investment in Jamaica followed those of Reynolds and Alcan in 1952, Kaiser in 1953, and Revere in 1971.

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