Alcoa budgets to cover Kwinana output

US-listed Alcoa Corporation will increase the amount it spends on alumina product by around 50 per cent in 2024, as it covers the output of its Kwinana refinery closure.

The revelation came as Alcoa Corporation, which owns 60 per cent of the Australian Alcoa World Alumina and Chemicals joint venture alongside ASX-listed Alumina, reported an adjusted net loss of $100 million for the December quarter across its global operations.

The company’s alumina segment adjusted EBITDA was $US84 million for the December quarter and fell from $US788 million in 2022 to $US273 million in 2023.

Adjusted EBITDA excluding special items fell 76 per cent to $US536 million in 2023, which the company attributed to lower realised prices for aluminium and alumina product and a higher production costs in its alumina segment.

The results come weeks after the company announced it would curtail operations at its ageing Kwinana facility south of Perth.

Chief executive William Oplinger described the Kwinana operation as 'marginal' in the company’s previous quarterly, and the oldest and least efficient of the company’s three Western Australian refineries. its closure is expected to save $US70 million ongoing beginning in Q3.

Speaking on the results announcement this morning, Mr Oplinger said the company’s alumina trading arm would ramp up to deliver on contracts previously serviced by Kwinana output.

“In past years, I think in 2023, we probably [bought] about two million metric tonnes [of alumina],” he said.

“As you see, with the curtailment of Kwinana, that’s increasing to about three million tonnes.”

Kwinana's nameplate output capacity is 2.2 million tonnes, but it was understood to be operating at around 80 per cent of that mark prior to last week's announcement.

Mr Oplinger said the company already had contracts in place with alumina suppliers for 2024 and would source output from around the world. 

Meanwhile, joint venture partner Alumina revealed its Australian operations benefited from lower production costs in Q4 as the price of processing inputs fell. 

Cash costs across AWAC fell from $303 per tonne in Q3 to $291/t in Q4. Excluding Kwinana and the troubled San Ciprian refinery in Brazil, AWAC cash costs fell to $263/t. Alcoa is exploring its options at San Ciprian, in a bid to further lower its costs.

Meanwhile, the AWAC JV’s significant processing operations at its Pinjarra and Wagerup will continue, treating ore mined at the company’s contentious Darling Range mine.

Mr Oplinger said approvals to continue mining at Darling Range in December were a significant milestone for the company, giving it a clear path forward for continued operation in WA.

The project, where mining started in 1963, is currently subject to an Environmental Protection Authority review but the joint venture has received permission from the government to continue mining areas of lower grade.

On receiving its approval, Alcoa committed to doubling its rate of environmental rehabilitation in the hardwood forest area while handing back land previously approved for clearing.

Alcoa Corporation said it expected its environmental and asset retirement spending to increase to $US295 million in the year ahead, from $US202 million.

The increase was attributed to acceleration of mine rehabilitation primarily in Australia, along with costs associated with assets reaching the end of their life and spend on demolition works.

The ability to mine new, higher grade bauxite areas in the Darling Range was identified as a medium-term opportunity for improvement by Alcoa.

In December, Alcoa appointed WA-based Matt Reed as its global chief operations officer and executive vice-president.