Alcoa (AA) Plans to Curtail Suralco's Refining Capacity - Analyst Blog
Aluminum giant Alcoa Inc. AA announced that it intends to cut 443,000 metric tons per year (mtpy) of alumina refining capacity at the Suralco facility in Suriname. Suralco, which is a part of the Alcoa World Alumina and Chemicals group of companies, is owned 60% by Alcoa and 40% by Alumina Limited. The curtailment is expected to be complete by Apr 30, 2015.
In the upstream portfolio, Alcoa continues to take strategic actions, including reduction of high-cost operating smelting capacity, to create a globally competitive commodity business. The company remains committed to working with the Suriname government in order to find the best solution for the Suralco facility. Suralco’s overall refining capacity is 2.2 million mtpy, with 876,000 mtpy currently idled.
Alcoa aims to move down the global aluminum cost curve to the 38th percentile and the global alumina cost curve to the 21st percentile by 2016. These actions will be taken in consultation with its stakeholders, and after thoroughly reviewing and determining the best outcome for them. The company will work with the employees and unions to see that they are not adversely affected by the curtailment.
In Oct 2014, the Suriname government and Alcoa inked a Memorandum of Understanding to find a solution for the future of Suralco. The facility has been operating in a challenging global environment with limited bauxite reserves and lack of a long-term energy solution. The discussions between the parties have led to the country’s government to sustain the bauxite industry in Suriname.
Alcoa and the government of Suriname have agreed to pursue a transaction in which a government-owned entity will buy the Suralco operations including the mining, refining and Afobaka hydroelectric operations.
Alcoa currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the mining space include NovaCopper Inc. NCQ, Energy Fuels Inc. UUUU and Denison Mines Corp. DNN. While NovaCopper sports a Zacks Rank #1 (Strong Buy), both Energy Fuels and Denison Mines hold a Zacks Rank #2 (Buy).
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