75% of Alcoa's Australian gas supply needs secured
PERTH (miningweekly.com) – Aluminium producer Alcoa has secured 12 years of gas supply for its Australian operations, ASX-listed Alumina reported on Thursday.
Alumina, which holds a 40% interest in the alumina alliance Alcoa World Alumina and Chemicals (AWAC), said the latest agreement meant that nearly 75% of the AWAC gas had been secured to replace existing gas supply agreements that would expire at the end of the decade.
The new supply agreement provides for 120 TJ/d of natural gas, starting in 2020, and secured the low-cost position of AWAC’s Australian alumina refining business.
Alumina noted that the impact of the gas supply agreement on AWAC’s alumina production costs would not be material, relative to the costs incurred in 2014.
“This secures the competitiveness of our low-cost Australian refining business into the next decade and is a very positive achievement given the current tightness in Western Australian energy markets,” said Alumina CEO Peter Wasow.
As part of the gas supply arrangements, Alcoa would make a $500-million prepayment against contracted supply. The prepayment would be payable in two installments, the first $300-million of which was due on the closing of the Apache asset sale, expected in May 2015.
The second installment of $200-million was due in 2016.
Alumina was not expected to contribute to funding the prepayment.
“While Alcoa of Australia is making a significant up-front payment to secure this important gas supply, the Alumina board remains committed to distributing excess funds to its shareholders. The board anticipates that if current market conditions prevail, Alumina will be in a position to continue to pay dividends to shareholders, and the board will review the options available to supplement dividends in light of the energy repayment,” Wasow added.
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