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Alcoa (AA) Clinches U.S. Army Contract for Combat Vehicles

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Aluminum giant Alcoa (AA - Free Report) has won a contract from the U.S. Army for R&D projects focused on developing novel, light-weighting solutions for next generation ground combat vehicles.

The five-year contract worth up to $50 million has been awarded to Alcoa Defense by the U.S. Army Tank Automotive Research, Development and Engineering Center (“TARDEC”). Under the contract, Alcoa Defense will support initiatives to advance technology R&D and supply engineering solutions for Department of Defense ground vehicles and intelligent ground systems.

Alcoa’s first “work directive” project, funded under the contract, is an initiative to upgrade company-developed aluminum weld wire alloys. These alloys have already been proven to improve the strength of welded joints and lessen corrosion of those welded joints on combat vehicles.

The contract builds on Alcoa’s long-standing alliance with the U.S. Army to develop solutions for advancing the performance of military ground combat vehicles. The company’s light-weighting solutions have improved troop protection while lessening vehicle weight and assembly time.   

Alcoa, in 2013, collaborated with the U.S. Army Research Laboratory (“ARL”) to make the world’s biggest single-piece forged aluminum hull for combat vehicles to improve troop protection. This monohull forging, which replaced the lower hull of a combat vehicle, has significantly improved survivability over conventional welded hulls.

Alcoa was also awarded a contract in 2005 by the U.S. Army Tank-Automotive and Armaments Command (“TACOM”) to develop aluminum structures for ground combat and tactical vehicles under the “Army Lightweight Structures Initiative”. Under that contract, the company delivered structural solutions that offered 30% to 50% weight savings on an average over baseline designs.

Alcoa’s shares gained around 1% to close at $9.57 last Friday.

Alcoa swung to a loss in the fourth quarter of 2015, hurt by charges related to restructuring and lower metals pricing. Alcoa's primary metals business posted a loss in the quarter, hit by lower aluminum prices and a decline in regional premiums. Headwinds from lower prices more than offset gains from productivity actions in the quarter.

The aluminum price rout has triggered the company’s move to separate its smelting and refining business from those that cater to rapidly growing aerospace and automotive markets. The separation, which is expected to close in second-half 2016, will mark the completion of Alcoa’s multi-year transformation.

Alcoa is a Zacks Rank #4 (Sell) stock.

Better-ranked companies in the mining space include NovaCopper Inc. , Golden Minerals Company (AUMN - Free Report) and Solitario Exploration & Royalty Corp. (XPL - Free Report) . While NovaCopper holds a Zacks Rank #1 (Strong Buy), Golden Minerals and Solitario Exploration carry a Zacks Rank #2 (Buy).

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