Alcoa Continues Reshaping Upstream Business, 443,000 Metric Tons of Suralco’s Refining Capacity to be Curtailed
Lightweight metals leader Alcoa (NYSE: AA) today announced that it plans to curtail 443,000 metric tons per year (mtpy) of alumina refining capacity at Suralco in Suriname. In addition, the Company and the Government of Suriname have agreed to pursue a transaction for a Government-owned entity to acquire the Suralco operations.
The curtailment and potential transaction are in line with Alcoa’s recent announcement to review upstream capacity for possible curtailment or divestiture and the Company’s strategic goal to create a globally competitive commodity business. The curtailment, which represents one digester, is expected to be complete by April 30, 2015.
“Reducing the production of the refinery will assist in extending the life of the operations as we continue to work with the Government of Suriname on the transaction,” said Bob Wilt, President Alcoa Global Primary Products. “We are committed to working with the Government to find the best solution for the Suralco facility.”
In October 2014, the Government and Alcoa signed a Memorandum of Understanding reflecting both parties’ intent to find a solution for the future of Suralco, which operates in a challenging global environment, with limited bauxite reserves and lacks a long-term energy solution. The resulting discussions between the parties have led to the Government’s decision to sustain the bauxite industry in Suriname.
Both parties now intend to pursue a transaction where a Government-owned entity would acquire Suralco, including the mining, refining and Afobaka hydroelectric operations. Following the appropriate due diligence, the parties are targeting to reach agreement on the proposed transaction by July 1, 2015.
The Company will work closely with unions and employees to reduce the impact of the curtailment on affected employees by offering fair severance packages. The Paranam refinery and related mining operations employ approximately 700 people, in addition to contracted personnel.
The net financial impact associated with the curtailment is not expected to be material to the Company’s earnings.
Alcoa’s review of its refinery operations is consistent with the Company’s goal of lowering its position on the world alumina cost curve to the 21st percentile and the aluminum production cost curve to the 38th percentile, by 2016.
Suralco’s total refining capacity is 2.2 million mtpy, with 876,000 mtpy currently idled. Suralco is part of the Alcoa World Alumina and Chemicals group of companies owned 60 percent by Alcoa Inc. and 40 percent by Alumina Ltd..
About Alcoa
A global leader in lightweight metals technology, engineering and manufacturing, Alcoa innovates multi-material solutions that advance our world. Our technologies enhance transportation, from automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products. We enable smart buildings, sustainable food and beverage packaging, high-performance defense vehicles across air, land and sea, deeper oil and gas drilling and more efficient power generation. We pioneered the aluminum industry over 125 years ago, and today, our approximately 59,000 people in 30 countries deliver value-add products made of titanium, nickel and aluminum, and produce best-in-class bauxite, alumina and primary aluminum products. For more information, visit www.alcoa.com, follow @Alcoa on Twitter at www.twitter.com/Alcoa and follow us on Facebook at www.facebook.com/Alcoa.
Forward-Looking Statements
This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “estimates,” “expects,” “goal,” “intends,” “plans,” “proposes,” “should,” “target,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding Alcoa’s goal to create a globally competitive commodity business, the expected timing for completing the curtailment of the Suralco refining capacity, the expected financial impact of the curtailment, and the expected timing for reaching an agreement on a proposed transaction with the Government of Suriname regarding the Suralco operations. Forward-looking statements are subject to risks, uncertainties and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) Alcoa’s inability to successfully realize goals established in each of its four business segments, at the levels or by the dates targeted for such goals (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and increasing revenues in its Global Rolled Products and Engineered Products and Solutions segments); (c) political, economic, and regulatory risks in the countries in which Alcoa operates, including unfavorable changes in laws and governmental policies, tax rates, civil unrest, or other events beyond Alcoa’s control; (d) the failure to extend the life of the Suralco operations as expected due to exhaustion of the bauxite, delay in curtailment of the refining capacity, or other reasons; (e) changes in preliminary accounting estimates due to the significant judgments and assumptions required; (f) the outcome of contingencies, including legal proceedings and environmental remediation; and (g) the other risk factors summarized in Alcoa’s Form 10-K for the year ended December 31, 2014, and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.
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