Alumina reports $33 million profit

Monday, Aug 26, 2013

Mining companies have been cheering the fall of the dollar, none more so than Melbourne-based Alumina, which has disclosed a $US30 million ($33m) annual profit before tax price sensitivity to just a 1c move in the US exchange rate.

For a firm that has been struggling to break-even at best of late, the fall in the dollar from a first half average of $US1.01 to US90c in recent days has provided what Alumina chief executive John Bevan described as "significant leverage".

He was speaking after Alumina posted an underlying loss of $US7.2m for the June half, an improvement on the $US13.1m loss in the previous corresponding period.

The improvement came from productivity gains in the operations of the Alcoa-managed AWAC, owned 40 per cent by Alumina and its only operating interest.

Mr Bevan said the interim loss reflected the "very tough market" for AWAC's alumina/aluminium interests. "It has been tough for a few years now so it's not just a recent phenomenon like some of the other commodities. So we are well advanced on the attack on costs. The productivity improvements have been fantastic and we are very pleased with the momentum there,"

Mr Bevan said. That has been reflected in AWAC achieving the fourth consecutive quarter of improved margins on its main undertaking, the production of alumina at refineries in Western Australia and at several overseas locations.

AWAC also owns the Portland and Point Henry aluminium smelters in Victoria. The smelters were loss-makers in the June half but are now benefiting from the lower dollar.

"We will certainly see the benefit from the Australian dollar now starting to move in our favour as much of our production is in Australia. It should help us significantly," Mr Bevan said.

Alumina would have been able to post a profit for the first-half had it not been for its exposure to Alcoa's previously announced $US85m cash settlement of a US civil bribery and fraud lawsuit from state-controlled Aluminium Bahrain (Alba), and ongoing probes by US authorities on the subject.

Alumina's underlying loss for the first half included a $US30m charge related to the Alba matter because of its interest in the Alcoa-managed AWAC, even though neither Alumina nor any of its employees was -- or is -- a defendant in the litigation around the Alba case.

Shares fell 2.5c to 97.5c.

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