Alcoa makes $3.35bn play to buy out JV partner Alumina in major bauxite and alumina business
\nLynas sees big fall in profits as prices for rare earths slip
\nRising Chinese production quotas not a concern once demand growth returns, says Lynas\u2019 Lacaze<\/p>\n
After years living the good life on its minority shareAlumina (ASX:AWC)<\/a> will finally be bought out by its JV partner Alcoa more than two decades on from its demerger from Western Mining Corporation.<\/p>\n Since 2002, Alumina has banked cheques from its 40% non-operating stake in the Alcoa World Alumina and Chemicals business managed by majority owner Alcoa, which counts Pittsburgh, home of the NFL\u2019s Steelers, as its base.<\/p>\n The American alumina producer will offer 0.02854 shares for every Alumina share, a 13.1% premium to AWC\u2019s last share price of $1.02.<\/p>\n It already has the support of Alumina\u2019s board and major shareholder, with Alcoa entering an agreement with Allan Gray Australia which gives Alcoa the right to acquire up to 19.9% of its stock at the sale price.<\/p>\n The news of the $3.35 billion bid comes as Alcoa looks to reconfigure AWAC\u2019s operations in Western Australia, where it is seeking to gain environmental approval to mine higher grade deposits within the State\u2019s jarrah forests after 2027.<\/p>\n Alcoa announced the closure this year of the higher cost Kwinana Refinery in Perth\u2019s south where production will wrap up this year before it is formally wound down in 2025, saying it will be making stronger margins on its Pinjarra and Wagerup refineries where its cash costs sit around US$250\/t.<\/p>\n Kwinana\u2019s costs were above US$410\/t across 2023 against prices of US$360\/t when the decision to curtail the factory was taken in January.<\/p>\n AWAC made US$84m in adjusted EBITDA in the December quarter, producing 2.6Mt of alumina at cash costs of US$291\/t, but without the closing Kwinana and San Ciprian refineries \u2014 the latter in Spain \u2014 those costs would have been US$263\/t.<\/p>\n If the scheme of arrangement is approved, Alumina shareholders would own 31.25% of the company, which has bauxite mines and alumina refineries across Australia, Brazil, Spain, Saudi Arabia and Guinea \u2013 including what Alcoa says are 5 of the 20 largest bauxite mines globally and 5 of the 20 biggest alumina refineries outside China \u2013 and owns 55% of the Portland aluminium smelter in Victoria.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n The largest rare earth producer outside China, Lynas (ASX:LYC)<\/a> remains bullish about the long term outlook for magnet metals despite further increases in Chinese production quotas and weak prices.<\/p>\n Lower prices saw Lynas\u2019 NPAT tumble from $150.1m in the first half of 2023 to $39.5m in H1 FY24, matching revenue and EBITDA slides from $370m to $234.8m and $189m to $62.6m, respectively.<\/p>\n It was ameliorated by lower sale costs, down from $185m to $159m, but Lynas saw its closing cash fall from $934.2m to $686.1m YoY, having invested $347m in capex over the December half, mainly on the construction of its Kalgoorlie cracking and leaching plant and expanding its Mt Weld mine near Laverton.<\/p>\n Lynas\u2019 production output was also hampered by a six week shutdown of its Malaysian refinery, where its separation capacity was scaled up to 10,500tpa.<\/p>\n Its shares rose 5.1% this morning.<\/p>\n But despite falling rare earths prices in 2023, Chinese authorities lifted quotas for rare earth mining and smelting again in early February by 12.5% and 10.4% respectively for the first half of the year to 135,000t and 127,000t.<\/p>\n Heavies quotas are down more than 7%, but light rare earths output will lift more than 14% after rare earths quotas lifted 21.4% and 20.7% last year to 255,000t and 243,850t respectively.<\/p>\n \u201cI think first of all the quotas were very modest, the increase in the quotas and if you pull them to pieces and you look at how much was in the mining quota, some of which was to balance out I think what the Chinese see is a potential shortfall in concentrate, which has been coming from (America\u2019s) MP Materials into China,\u201d Lynas MD Amanda Lacaze said on a conference call.<\/p>\n \u201cBut as MP sort of move to their own separated material, there\u2019ll be some change in that. <\/p>\n \u201cThe increase in quotas for processing was very modest. We do think that there\u2019s been some inventory build in China, and we would expect that based upon the quotas and what we see as sort of the demand trends right now that will unwind over this calendar year.\u201d<\/p>\n Lynas held discussions around a merger with MP Materials in recent weeks which came to nothing. The deal would have created a single global ex-China rare earths major with two of the world\u2019s largest sources of light rare earths in Lynas\u2019 Mt Weld and MP Materials\u2019 Mountain Pass mine in California.<\/p>\n But those have come to nothing. Lacaze said while a soft economy in China had dulled NdPr prices, demand from non-Chinese customers was strong and it was still able to place all of its material under long-term contracts, while Lynas was continuing to see inquiries from new customers despite weak prices.<\/p>\n She said the development of a larger magnet market outside China \u2014 supplying end markets like consumer electronics, EVs, renewables and defence \u2014 was important for the dynamics of the rare earths trade, where downstream segments are almost entirely concentrated in the Middle Kingdom.<\/p>\n \u201cWe need more magnet making outside of China. There are I think seven different projects in the US right now for increasing magnet making capacity in the US,\u201d she said.<\/p>\n \u201cThere\u2019s a couple of new projects in Vietnam. Not all of these will come to market, we all know that. But we believe that it will be sufficient come to market that we start to create a different ecosystem.\u201d<\/p>\n Meanwhile, Lynas is on the lookout for M&A opportunities to secure more sources of heavy rare earths like terbium and dysprosium, high value rare earth metals largely mined in ionic clay deposits in China and neighbouring Myanmar.<\/p>\n But she said she has yet to visit Brazil, where hype is growing around high grade ionic clay discoveries by companies like Meteoric Resources (ASX:MEI)<\/a> and Brazilian Rare Earths (ASX:BRE)<\/a>, instead looking to partner with owners of ionic clay deposits near its Kuantan refinery in Malaysia.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Ground Breakers: Alumina making for the exit, and Lynas teases out small profit<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Alumina (ASX:AWC) share price today<\/h2>\n\n
Lynas confident rare earths market will turn despite big crash in profits<\/h2>\n
Lynas Rare Earths (ASX:LYC) share price today<\/h2>\n\n
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