Aluminum giant, Alcoa Inc. AA announced that Alcoa Australia will divest its stake in DBP, to DUET Group for AU$205 million (about $154 million). Alcoa of Australia owns 20% of DBP, the owner and operator of the Dampier to Bunbury Natural Gas Pipeline (“DBNGP”), while the remaining 80% is owned by DUET.
The transaction is expected to close by April. As part of the deal, Alcoa of Australia will maintain its current access to roughly 30% of the DBNGP transmission capacity for gas supply to its three alumina refineries in Western Australia.
Alcoa expects to recognize a gain in the range of $10–$15 million, after-tax and non-controlling interest, or 1 cent per share. Alcoa of Australia expects the net cash impact of the transaction, after estimated fees and taxes, to be roughly $115 million.
Last month, Alcoa clinched a major aerospace contract. The New York-based company has landed a long-term supply agreement with Boeing BA, marking its fourth multi-year contract with the aerospace giant in a series of recent deals.
Under the new contract, Alcoa will supply multi-material aerospace parts to Boeing. The company will provide components for the 777X (Boeing’s newest commercial airplane), the 787 Dreamliner and the 737 MAX scheduled for first delivery in 2017. With this latest deal, Alcoa has secured roughly $10 billion in aerospace contracts since the beginning of 2015.
Alcoa swung to a loss in the fourth quarter of 2015, hurt by charges related to restructuring and lower metals pricing. Alcoa's primary metals business posted a loss in the quarter, hit by lower aluminum prices and a decline in regional premiums. Headwinds from lower prices more than offset gains from productivity actions in the quarter.
The aluminum price rout has triggered the company’s move to separate its smelting and refining business from those that cater to rapidly growing aerospace and automotive markets. The separation, which is expected to close in second-half 2016, will mark the completion of Alcoa’s multi-year transformation.
Alcoa is a Zacks Rank #4 (Sell) stock.
Some better-ranked companies in the mining space are First Quantum Minerals Ltd. FQVLF and NovaCopper Inc. NCQ. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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