Alcoa and Government of Suriname pursuing potential transfer of Suralco to Government and sustaining country’s bauxite industry
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 Limited.
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
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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.
Alcoa
Investor Contact
Nahla Azmy, + 1 212-836-2674
Nahla.azmy@alcoa.com
or
Media Contact
Sonya Elam Harden, + 1 864-836-2078
Sonya.harden@alcoa.com