overview of ord - huge potential, page-47

Trying to follow Oscar's reasoning

It takes 3.5t of bauxite to produce 1 tonne of alumina

Digging up the bauxite is the easy/cheap part

130 million tonnes bauxite produces 37m tonnes of alumina

ORD's share, if 25%, = 9MT

AWC owns 40 per cent of Alcoa World Alumina and
Chemicals (AWAC).

AWC reported first quarter 2011 spot and index alumina prices have averaged US$392 per tonne for the first quarter

Alumina currently crashed to about $370/t (14.5% of aluminium price)

AWAC production of alumina for the first quarter was 3.8 million tonnes.

So the AWAC sales revenue = 3.8mt x $392 = $1.5b

Alumina Limited received US$80 million of fully franked dividends from the AWAC joint venture during
the quarter.

So the NPAT for AWAC = $200m

The PBT = $286m

The expenses = $1.2b

Alcoa for all their business lines reported a 79% COGS expense for 31/3/11

Say $200m of AWAC expense = depreciation, interest, admin, etc

Say the AWAC COGS (cost of goods sold) = $1b or 66% of revenue

Last AWC presentation states bauxite is 28% of alumina cost.

Cost of 3.8mt of alumina = $1b or $263/t

Bauxite expense = $74/t

3.5t baux = 1t alumina

bauxite valued on sales value basis at $21/t

in-situ value is generally 10% of sales value

say 25% ORD share of 130mt of bauxite = 0.25 x 130m x $21 x 10% / 500m shares = 14 cents per share

14 cents per share is a little different than $9 per share