ASX-listed Alumina (ASX:AWC), the Australian vehicle that carries NYSE-listed Alcoa, is preparing to shut down its 60-year-old Kwinana refinery.
Starting in Q2 of CY24, the 2.2 million tonnes per annum capacity facility will start to go offline in stages, with more than 500 staff also set to be given the boot.
The facility’s aging infrastructure, lower than desired bauxite grades from WA mining ops, scale, and related operating cost considerations have contributed to management’s decision.
This journalist, for one, can confirm having witnessed leaking pipes on-site at the facility years ago oozing an orange-stained watery discharge. Not that this is particularly unusual for a 60-year-old anything.
Pre-tax net loss of US$130 million
The Kwinana facility cost Alcoa US$130 million in 2023, according to the NYSE-listed parent company proper. Keeping it open doesn’t make sense.
“While we acknowledge the potential impacts on workers and other stakeholders, Alumina Limited fully supports the decision by Alcoa in response to losses incurred at the Kwinana refinery,” Alumina CEO Mike Ferraro said.
“The announcement today follows two announcements in December – the approval of mining permits in WA and Alcoa’s decision to further reduce losses [at the San Ciprian refinery.]
“The combination of these actions provides AWAC with a strong foundation to move forward to create a significantly higher quality refinery portfolio and benefit from the positive long-term outlook for the alumina market.”
Further information will be provided when Alcoa reports on January 18 in line with the Q1 American earnings season.
500+ jobs cut in six months
Currently, the workforce at Kwinana is around 800. By Q3 of this year, that number is expected to be closer to 250.
By Q3 2025, about 50 jobs will remain altogether.
At this time, alumina production will cease altogether. This is expected to save Alcoa about US$70 million in the third quarter alone.
“We remain committed to WA in the long-term and will continue to assess options for the refinery, monitoring the factors that have led to the curtailment decision,” Alcoa Executive Vice President and COO Matt Reed said.
Factors being monitored are likely to include the presence of oozing liquids on-site and other issues you’d predict occurring with a facility that’s been around for longer than half a century.
While curtailed, the facility will continue to incur an expected US$40 million of depreciation expense each year.
All in all, the curtailment will incur restructuring charges “between US$180 and $200 million,” the company wrote today.
Not a great day for the resources sector when two large closure announcements are made – both from Panoramic and Alcoa.
Only days after Core, too, though the others don’t have sixty-year-old assets to worry about.