Alcoa’s Roy Harvey informed participants in a quarterly earnings call this week that he expects the firm to “dramatically” increase bauxite exports from its operations in Western Australia after the first shipment of ore from the region last month.
The company’s first commercial shipment of bauxite from the mine at Huntly took place in December, the first of a planned series of shipments in a 400 thousand metric ton off-take agreement with an unnamed Chinese customer.
Harvey went on to inform listeners that the Western Australian state government has authorized bauxite exports of up to 2.5 million metric tons per year over the next five years. Alcoa ships about six million metric tons of bauxite per year from the region at present. Its overall production from the Huntly and Willowdale mines is 35 million metric tons per annum, most of which goes to Alcoa’s own refineries at Kwinana, Pinjarra, and Wagerup.
The firm did not disclose what it was being paid for bauxite, but spot prices for high-grade aluminium were above A$50 at the time of the December shipment, and Alcoa’s CFO William Oplinger revealed previously that its margins on bauxite shipped from Australia were in the neighborhood of thirty-five percent.
Globally, Alcoa plans to increase global capex to US$150 million, a US$50-million increase, in order to enhance its bauxite operations.
“We continue to see great opportunities in the merchant bauxite markets and with modest capital expenditures we can increase our third-party sales volumes dramatically,” said Harvey.
“During 2016 we started to build partnerships with key customers in China and elsewhere that can flourish and grow as we build out this highly profitable business.”
Harvey went on to say that the Pinjarra refinery was its lowest-cost operation, and that the plant set new production records in the previous quarter.