Alcoa Inc. (AA) and the Saudi Arabian mining company Ma'aden signed financing agreements worth $10.8 billion.
Ma'aden Bauxite and Alumina Co. signed agreements with 13 local and international banks including a combination of conventional and Islamic allocations totaling $991.5 million.
Alcoa owns 25.1% of Ma'aden Bauxite and Alumina, while Ma'aden owns the rest. The project consists of a bauxite mine with an initial capacity of 4 million metric tons per year, an alumina refinery with an initial capacity of 1.8 million metric tons per year, an aluminum smelter with an initial capacity of 740,000 metric tons per year and a rolling mill with initial capacity of 380,000 metric tons per year.
The alumina refinery will cost approximately $3.6 billion. Moreover, 60% of the total cost of the second phase ($2.15 billion) is financed through the Public Investment Fund, Saudi Industrial Development Fund, financial institutions and commercial banks. The remainder ($1.43 billion) will be financed through the project partners, Ma’aden and Alcoa, which is in line with their project ownership ratios.
The first commercial production is scheduled for 2013.
Recently, Alcoa announced its third-quarter 2011 results. Adjusted earnings per share of 15 cents missed the Zacks Consensus Estimate of 22 cents per share. Adjusted earnings more than doubled from 6 cents per share reported in the year-ago quarter, but were 46.4% lower from the sequential quarter earnings of 28 cents per share due to lower metal prices, seasonal factors and weakness in Europe.
Revenues for the quarter were up 21% year over year to $6.419 billion, and were down from $6.585 billion in the sequential quarter. Alcoa’s end-markets demonstrated strong revenue growth, on a year-over-year basis, whereas sequentially the company experienced mixed market conditions. Revenue was lower for both alumina and aluminum, down 5% and 1%, respectively, driven by lower alumina shipments and lower realized pricing in both businesses. In end markets, revenue increased in commercial transportation (6%) and aerospace (2%), while declines were seen in automotive (7%), industrial products (6%), building and construction (5%), and packaging (4%).
The company’s adjusted EBITDA was $821 million, up 36% from the third quarter of 2010, but down 21% from the second quarter of 2011.
Currently, Alcoa has a short-term (1 to 3 months) Zacks #4 Rank (Sell rating) and a long-term (6 months) Neutral recommendation.
Alcoa faces stiff competition from Aluminum Corporation Of China Limited (ACH), Rio Tinto plc. (RIO) and BHP Billiton Ltd. (BHP).
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