Aluminum giant Alcoa Inc. (AA - Free Report) announced that it will delay the construction of a potline at its Baie-Comeau smelter in Quebec as part of a revised modernization schedule and will start preparing for the upgrade by investing $100 million over the next three years and permanently closing the plant’s two Soderberg potlines.
As a result, the new potline, which was originally scheduled to be operational by 2016, is now expected to be in service by 2019. The revision is based on the prevailing market conditions.
The $100 million investment for the smelter includes $30 million for upgrading the plant’s casthouse facilities in support of the growing automotive market. The revised project schedule will not affect Alcoa’s commitments to the Government of Quebec and will have a positive effect on the environment.
Alcoa expects to complete the closure of the two potlines by Aug 2013. These potlines have a total capacity of 105,000 metric tons and are a part of Alcoa’s previously announced curtailments of 460,000 metric tons of smelting capacity. The announcement of the shutdown is in sync with Alcoa’s strategy to move down the cost curves as these potlines represent the highest-cost smelting capacity. The shut down will result in a reduction of greenhouse gas emissions at the Baie-Comeau plant by about 40%.
Alcoa expects restructuring-related charges associated with the closure to be between $135 million and $155 million after-tax, or 11 cents to 13 cents per share in 2013, of which, roughly 30% would be recorded in the second quarter. Cash costs are expected to be about $100 million in 2013.
Alcoa, which is among the prominent players in the mining industry along with Aluminum Corporation of China Limited and BHP Billiton Limited (BHP - Free Report) , is the world leader with respect to production and management of primary aluminum, fabricated aluminum, and alumina as well as the world’s largest miner of bauxite and refiner of alumina.
Alcoa currently retains a short-term Zacks Rank #3 (Hold).
Another company in the mining industry with favorable Zacks Rank is Anglo American Platinum Ltd. , having a Zacks Rank #2 (Buy).