Alumina Annual Report 2015

FY2015 Annual Report · Alumina

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Prepared

ANNUAL REPORT 2015

Alumina Limited (as a partner with Alcoa Inc in Alcoa World Alumina and
Chemicals (AWAC)), is well prepared for growth in the years ahead.

AWAC has weathered the storm in recent years by reducing both costs
and debt and focussing on lower cost alumina refining and bauxite
mining assets.

The Company has laid the foundation for sustainable growth by the
restructuring of AWAC’s asset portfolio.

AWAC is well resourced with long-life mines and nearly all AWAC mines
are integrated with low cost refineries.

As bauxite prices increase, AWAC’s mines become more valuable and
as the industry increasingly relies on sea borne bauxite, our integrated
operations become even more competitive.

A stronger US dollar, productivity improvements and a lower cost base
have contributed to our best financial result in many years. This is reflected
in the highest dividend since 2008.

CONTENTS1

At a glance

Chairman and Chief Executive
Officer’s Report 2015

Sustainability – Future Focused

Directors’ Report

Operating and Financial Review

Letter by Chair of
Compensation Committee

Remuneration Report

Financial Report

Shareholder Information

Financial History

1 Contents – Corporate Governance Statement
Alumina Limited has elected to release it’s 2015 Corporate Governance Statement only on the Company website at:
www.aluminalimited.com/governance/

Building a
stronger business

At a glance

The restructuring and portfolio repositioning which began in 2014, resulted in a reduction
in the overall cost position of AWAC and improved operating performance. However, the
continued reshaping of AWAC’s portfolio resulted in a negative impact on Alumina Limited’s
results for the year. In 2015 Alumina Limited recorded a net profit after tax of $88.3 million
compared to a net loss of $98.3 million in 2014. In context, the Company would have
made a net profit of $258.2 million (2014: $91.1 million) excluding the significant items.
This improvement is in line with the better operating performance of AWAC.

The 2015 significant items that were largely the result of restructuring activities related
to the Suriname and Point Comfort refineries, and the closure of the Anglesea power
station in Australia.

ALUMINA LIMITED RESULTS

$88.3m

NET PROFIT AFTER TAX
US$88.3 MILLION

(2014: Net Loss after tax:
US$ 98.3 million)

$258.2m

PROFIT EXCLUDING
SIGNIFICANT ITEMS OF
US$258.2 MILLION

(2014: Profit:
US$91.1 million)

$101.2m

NET DEBT
US$101.2 MILLION

(2014: US$86.6 million)

4.8%

GEARING 4.8 PER CENT

(2014: 3.4 per cent)

$106.3m

AWAC DIVIDENDS AND
DISTRIBUTIONS OF
US$106.3 MILLION RECEIVED

(2014: US$119.2 million)

3.9%

RETURN ON EQUITY

(2014: Negative
3.5 per cent)

Alumina Limited is a leading Australian company listed
on the Australian Securities Exchange (ASX).

We invest worldwide in bauxite mining, alumina refining
and selected aluminium smelting operations through
our 40% ownership of AWAC.

Our partner, Alcoa Inc. (Alcoa), owns the remaining 60%
of AWAC, and is the manager. The AWAC joint venture
was formed in 1994 and our relationship with Alcoa
dates back to 1961.

Alumina Limited represents a unique opportunity for a
pure investment in AWAC, the world’s largest alumina
and bauxite producer.

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AWAC – A global business

In 2015 AWAC recorded a net profit after tax of $318.2 million compared to a net loss of $243.0
million in 2014. In both years, AWAC’s results were affected by one-off significant items related to
the restructuring and repositioning of AWAC’s portfolio. AWAC’s EBITDA, excluding significant items
increased by $495.5 million to $1,364.5 million, a 57% improvement on 2014.

Cash from operations was also affected by significant items as well as timing differences, such as
tax payments and movements in working capital. Adjusted for these items, operating cash flow
improvement would be more in line with EBITDA growth.

AWAC RESULTS

$318.2m

AWAC NET PROFIT AFTER TAX
US$318.2 MILLION

15.1m tonnes

ALUMINA PRODUCTION OF
15.1 MILLION TONNES

$808.9m

AWAC CASH FROM OPERATIONS
US$808.9 MILLION

(2014: Net loss after tax:
US$243.0 million)

(2014: 15.9 million tonnes)

(2014: US$475.9 million)

The origins of the AWAC partnership between Alcoa and
WMC Limited (now Alumina Limited) began in the early
1960’s following the discovery of bauxite deposits and
other resources by WMC Limited and two other Australian
companies. Alcoa was invited to join the project to provide
technology, aluminium expertise and finance.

Over the following years the venture grew to include
refineries and smelter interests as the partners sought to
take opportunities to expand the business. By 1990, WMC
Limited’s interests in Alcoa of Australia had grown to
48.25% through acquiring the minority interests of other
participants, other than Alcoa.

In July 1994, WMC decided to expand this interest
as a worldwide bauxite, alumina and alumina-based
chemicals enterprise.

WMC Limited and Alcoa combined their respective
bauxite, alumina and alumina-based chemicals
businesses and investments and some selected
smelting operations to create AWAC in January 1995.

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Chairman and
Chief Executive Officer’s
Report 2015

0 4

The Company’s financial performance improved significantly in 2015
reflecting in part the benefits of restructuring the AWAC asset portfolio
over recent years. While world commodity markets and the alumina
price experienced volatility and weakness, Alumina Limited delivered
its best financial results and highest dividends since 2008.

CHAIRMAN & CEO REPORT

The deliberate repositioning of the AWAC asset portfolio
has required difficult decisions, with over 30 per cent of
the Joint Venture’s alumina capacity curtailed, closed or
sold over the past two years. This has strengthened the
competitive position of our asset portfolio and we have
continued to invest in our best assets and added new, low
cash-cost capacity through our investment in the Ma’aden
bauxite mine and alumina refinery in Saudi Arabia. As a
result of these actions, AWAC’s position on the alumina
industry cost curve is expected to be in the 21st percentile
in 2016, a step-change improvement from the 30th
percentile ranking as recently as 2010.

In 2015, our lower cost base and higher production from
our lowest cost refineries combined to lift profit margins
and cash flows. Alumina Limited’s full year net profit after
tax was $258.2 million, excluding significant items.
The curtailment of the Suralco and Point Comfort
refineries, the closure of the Anglesea power station
and other restructuring charges reduced net profit after
tax to $88.3 million.

While alumina prices declined significantly throughout the
year, AWAC cash from operations increased 70 per cent
on the prior year. This enabled payment of a final dividend
of US 1.8 cents per share, bringing the total dividend for
the year to US 6.3 cents per share.

OPERATING HIGHLIGHTS

AWAC’s EBITDA margin for alumina production was
$91 per tonne, a significant improvement on $54 per tonne
in 2014. This reflected a large improvement in AWAC’s
operating costs. Lower energy costs, a stronger US dollar
and productivity initiatives in materials, maintenance and
transport all contributed to a 13 per cent decline in
average cash costs.

The stronger alumina price index (API) prices in the first
half, and continued progression by AWAC to sales on
an API basis, also contributed to improved margins.
The alumina sales that moved from legacy contracts
to an API basis achieved higher prices. During 2015,
75 per cent of AWAC’s third party sales were on an
indexed or spot basis. This should increase to
approximately 85 per cent in 2016.

The ramp up of the Saudi Arabian bauxite mine
and alumina refinery with Ma’aden in 2016 will add low
cost production to AWAC. The refinery is expected to
reach full production capacity in the first half of 2016.

In April 2015, Alcoa of Australia committed to a new 12
year gas supply agreement for the initial supply of 120
terajoules per day of natural gas, commencing in 2020.
This gas supply agreement secures the competitiveness
of AWAC’s low cost Australian refining business into the
next decade. A $300 million prepayment made under the
contract means Alcoa of Australia receives a portion of
contracted gas from 2020, against which there will be no
cash outflow. A further $200 million prepayment will be
made in the first half of 2016.

AWAC’s low cost operations in Australia and Brazil
achieved production records in 2015. In 2016, the
Australian and Brazilian refineries should provide
approximately 85 per cent of AWAC’s production.

AWAC’s cash from operations increased by $333 million
dollars to $808.9 million dollars in 2015. This was
an excellent outcome, particularly as it included the
$300 million instalment for the gas supply agreement.
Capital expenditure for AWAC was lower at $178.4 million
(2014: $237.9 million).

Corporate costs for Alumina Limited were lower at
$11.9 million (2014: $13.5 million), assisted by a stronger
US dollar and deregistration from the Securities and
Exchange Commission in 2015. Funding costs also
declined to $6.6 million from $13.6 million in 2014.
The Company is now financially stronger and has
significantly reduced its finance costs.

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During 2015, AWAC changed its business unit structure
to create a separate mining business unit. The greater
business and market focus on AWAC’s bauxite assets
should enable optimisation of these assets and increased
development and sales opportunities. The AWAC bauxite
mines in Western Australia are scheduled to make their
first bauxite sale to third party customers in early 2016.

ALCOA INC SEPARATION

AWAC’s two joint venture partners, Alcoa and Alumina
Limited, have different corporate strategies. Alcoa remains
a major primary producer of aluminium, but has a growing
focus on its successful downstream and diversified
manufacturing portfolio. Alumina Limited remains a
focused investor in the bauxite and alumina industry.

CAPITAL MANAGEMENT

The Company’s strategy is to maintain a balance sheet
that can meet the demands of the commodity cycle and
enable cash flows to be readily distributed to
shareholders. The Company has worked to strengthen
its balance sheet and debt is at target levels. This means
that as future free cash flow is generated by AWAC,
shareholders can readily benefit.

The Board will consider the Company’s capital structure
and future capital requirements in determining dividends,
but the Board will always give a high priority to distributing
dividends to shareholders.

AWAC distributed $106.3 million in dividends, distributions
and capital returns to Alumina Limited in 2015, and a
further $29.5 million in January 2016. The Company’s
lower cost and debt levels enabled dividends to
shareholders of US6.3 cents per share to be paid
in respect of 2015.

The Company has sought in 2015 to ensure shareholders
benefit from accumulated franking credits. For the interim
dividend, the Dividend Reinvestment Plan was introduced
and resulted in an almost 50 per cent take up by
shareholders.

ALUMINA LIMITED STRATEGY

The Company’s strategy is to invest worldwide in
bauxite mining and alumina refining operations through
its 40 per cent ownership of AWAC, the world’s leading
bauxite and alumina producer.

In a dynamic environment and where the future for the
bauxite and alumina industry is evolving rapidly, the
Company is active in protecting and growing the value of
its investments. The alumina industry is a capital intensive
industry where investment and portfolio decisions have
long lasting impacts.

The Company’s view of the bauxite, alumina and
aluminium markets allows detailed discussion with Alcoa
on portfolio management, investment opportunities and
disruptive threats. We have worked proactively with Alcoa
in recent years to ensure alignment on the restructuring of
the AWAC asset portfolio.

Alcoa announced in September 2015 a plan to separate
into two independent, publicly traded companies. One
of the separated companies would comprise Alcoa’s
upstream business, including its 60 per cent interest in
AWAC. The separation of Alcoa Inc should enable greater
recognition of the value and attractiveness of the AWAC
business. The separation plan by Alcoa and its
implications for the owners of AWAC, is something
Alumina Limited will closely consider, consistent with
our strategy.

GOVERNANCE

Alumina Limited has elected this year to disclose its
Corporate Governance Statement only on the Company
website www.aluminalimited.com/governance/, as
provided for in the ASX Listing Rules. The Company
reports its governance practices consistent with the 3rd
Edition of the Corporate Governance Principles and
Recommendations of the ASX Corporate Governance
Council. Important governance changes incorporated for
2015 included modifying the Charter of the Audit & Risk
Management Committee to incorporate responsibility
for the Company’s risk management framework and to
review the risk management framework at least annually.
Alumina Limited’s compliance with the Corporate
Governance Principles and Recommendations is
defined in the Appendix 4G lodged with the ASX.

The Remuneration Report reviews the Company’s
remuneration strategy, policy and outcomes. The
Company’s 2015 Remuneration Report provides full
details of the personal and corporate objectives of senior
executives and an assessment of their performance
against those objectives. Having regard to performance
being achieved against personal and corporate objectives,
a short term incentive award was made to the CEO and
senior executives.

For Non-Executive Directors, there is no increase in fees
for the 2015 year and fees have been unchanged since
1 January 2011.

Although the Company completed its deregistration in
the US in 2015, it maintains its US American Depositary
Receipts (ADR) program in the US Over-the-Counter
(OTC) market, and remains committed to its US investors.

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SUSTAINABILITY

At Alumina Limited we believe that sustainability efforts,
linked to specific goals, are an investment in the future.
AWAC’s sustainability initiatives are driving efficiencies
in energy usage and are impacting the bottom line. Health
and safety efforts are making a safer workplace and
contributing to improved current and future well-being of
employees. Biodiversity efforts are protecting the natural
environment for present and future generations.

Alumina’ Limiteds and AWAC’s focus also includes
emissions reductions, water management and security
and continuing close engagement with the communities in
which AWAC operates. All of these aspects are forward
looking and support AWAC’s licence to operate in the
future. Alumina Limited and AWAC’s sustainability targets
and outcomes are discussed in greater detail in the
Sustainability Update on the Company’s website.

OUTLOOK

There was an excess of world alumina production
compared with demand in 2015. In addition there was a
significant drop in the alumina cash cost curve. Together
with the lower aluminium price and margins, Chinese and
Australian alumina prices fell, in the case of Australian
alumina from $355 to $200 per tonne over the course
of 2015: the lowest for many years.

In China, where the cost of production is on average
much higher than AWAC’s, there has been a significant
curtailment response to low prices. Seven million tonnes
of Chinese alumina capacity have been curtailed and
planned capacity additions have been slowed. As a result,
it is expected that the supply/demand surplus will tighten
considerably over 2016. These factors have led to a
modest price recovery in early 2016.

However, there is a risk that the curtailments of some
higher cost refineries will not occur in the medium term
and alumina prices will be slow to recover. Also, there is
the risk that aluminium production will fall because of low
metal prices, leading to lower demand for alumina.

CONCLUSION

Whatever volatile commodity markets have in store, the
Company is well prepared. The AWAC asset portfolio is
stronger than ever and our costs and borrowings are at
very low levels. Together this means that we can withstand
even the very low prices that we saw at the start of 2016.

We thank our employees for their work to sustain and
improve the Company during 2015.

PETER WASOW
Chief Executive Officer

GJ PIZZEY
Chairman

Sustainability –
Future focused

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Sustainability –

Future focused

AWAC is involved in the energy and resource intensive business of extracting
bauxite ore and refining it into alumina, the primary raw material used in the
manufacture of aluminium. The business impacts the local communities in which
it operates, its employees – their health, safety and livelihood, and the natural
environment: directly through its activities and indirectly through products used
daily that are manufactured from aluminium.

The business’ financial impact reaches to shareholders, suppliers, local communities,
ancillary services, local and national governments where it operates – in Australia,
Brazil, Spain, Texas in the USA and until recently, Suriname. AWAC also has minority
interests in an alumina refinery and mine in Saudi Arabia and mining activities located
in Guinea and Brazil.

AWAC’s sustainability goals are focused on future
outcomes that result in lasting benefits to all stakeholders.
Sustainability goals drive business efficiencies, contributing
to productivity gains and improved social and
environmental outcomes. AWAC’s operations and
sustainability efforts and strategies are the responsibility
of Alcoa, the 60 per cent partner and operator of the
AWAC joint venture. AWAC shares the sustainability goals
of Alcoa’s upstream business. Alumina Limited supports
the sustainability aspirations of Alcoa and through the
governance structure of AWAC, reviews the sustainability
strategy and outcomes.

AWAC’s sustainability goals are clearly defined,
challenging and are subject to annual scrutiny. They
are incorporated into the business processes and there
is a specified process of sustainability scorecards that
oversee the integration of goals into business strategy
and measure progress to short-term targets and also
a framework of business roadmaps to achieve long-term
sustainability goals.

Alumina Limited reports in reference to the global
sustainability reporting principles and standards of the
Global Reporting Initiative (GRI) G4. A more detailed
account of Alumina Limited’s and AWAC’s sustainability
practices and performance is available in the Company’s
sustainability update on the Company website.

AWAC
BUSINESS

Bauxite
deposits

BAUXITE TO ALUMINIUM PROCESS

Aluminium ore, most commonly bauxite,
is plentiful and occurs mainly in tropical
and sub-tropical areas–Africa, West
Indies, South America and Australia–
with some deposits in Europe. Although
plentiful, bauxite quality is diminishing,
is often not readily accessible and is
becoming harder to gain approvals for
expansions or new mines. AWAC is the
world’s largest bauxite miner. AWAC
operates mines integrated with alumina
refineries in Western Australia, Brazil
and until late 2015, in Suriname (when it
was fully curtailed). Other refineries
operate in Spain and Texas in the US.

AWAC’S SUSTAINABILITY
APPROACH

Engagement with the local communities
and stakeholders is a priority to identify
and evaluate specific, environmental,
economic or social sustainability issues.

AWAC’s licence to operate is based
on its recognised ability to successfully
restore mining sites to their pre-mining
condition, re-establishing eco-systems
and biodiversity values. Before
expanding or commencing a new mine,
external consultants are engaged to
conduct comprehensive environmental
impact assessments to determine the
impact the project would have on the
environment. In all aspects of business
development and operation, the health
and safety of employees and contractors
is a priority.

LONG-TERM
SUSTAINABILITY
OBJECTIVES SET
BY ALCOA1

Zero employee
and contractor
fatalities.

Zero work-related
injuries and
illnesses have
been long-
standing goals.

0 9

AWAC
BUSINESS

Bauxite
mining

Mine
Rehabilitation

Alumina
refining
process

BAUXITE TO ALUMINIUM PROCESS

AWAC’S SUSTAINABILITY
APPROACH

AWAC’s bauxite deposits are generally
extracted by open cast mining from
strata, typically some four to six metres
thick under a shallow covering of topsoil
and vegetation. The topsoil is removed
and stored for later use in restoration of
the forest. Generally there is a layer of
capstone that is removed to expose the
bauxite ore which is extracted, broken
up and transported to refineries
for further processing. AWAC is the
world’s largest bauxite miner and is well
positioned with long life mines. AWAC’s
Huntly mine is the world’s largest
bauxite mine, supplying bauxite ore to
Pinjarra and Kwinana Refineries.

Mining is generally limited to relatively
small pits and haul roads or infrastructure
such as conveyors and railways are
constructed to enable transportation of
the ore. Particular care is taken in
building roads etc. to avoid isolation of
wildlife, disruption of streams and critical
habitats. For example in Australia, haul
roads were repositioned to protect
nesting areas for threatened bird
species. Mining operations can alter
rainfall runoff patterns and surface and
ground water hydrology which can have
impacts on stream ecology and
biodiversity. These are monitored and
managed to preserve biodiversity.

Rehabilitation is one of the most
important parts of the mining process.
AWAC supports the objective
of returning mined areas to a
sustainable future use. In most cases
this means returning disturbed land
to the pre-existing flora and fauna
condition. Preservation of biodiversity
of plant species and fauna species
is an important focus and is a major
consideration for rehabilitation plans
or future use decisions. Typically
rehabilitation efforts include returning
collected and fresh topsoil,
broadcasting collected and treated
seeds and planting of nursery
established plants.

A key objective at AWAC’s mines and
bauxite residue areas is to minimise
the footprint of disturbed land by
implementing a program of progressive
land rehabilitation. At the Juruti mine in
Brazil, AWAC has implemented the
nucleation method of rehabilitation to
reclaim mined out areas. This involves
creating micro-environments using
mounds built from topsoil and forest
waste produced from mine clearing.
It has helped reduce costs by 40%
and flora is returning at a rate exceeding
projections and attracting and
maintaining wildlife in the first year
instead of the expected third to
fifth years.

Aluminium does not occur naturally as
a metal, but must first be refined from
bauxite in its oxide form. Bauxite is
washed, ground and dissolved in
caustic soda (sodium hydroxide) at high
pressure and temperature at an alumina
refinery. Approximately two tonnes of
alumina are required to produce one
tonne of aluminium. AWAC is the
world’s largest alumina business
operating five alumina refineries in
several countries, Australia, Brazil,
Spain, and the USA. AWAC
is a low cost alumina producer with
global alumina production capacity
of 14.1 million tonnes per year.

AWAC is developing innovative ways
of adapting and using bauxite residue
for alternative use.

Refining alumina is an energy intensive
operation therefore key AWAC
sustainability targets involve improving
energy efficiency and reducing GHG
emissions. A strategy is to source
operating locations with low carbon
based power. In early 2015, the San
Ciprian refinery in Spain completed its
transition from fuel oil as the major
energy source to cleaner natural gas.

LONG-TERM
SUSTAINABILITY
OBJECTIVES SET
BY ALCOA1

From a 2005
baseline, a 25%
reduction in
average
freshwater-use
intensity and
30% by 2030.

Achieve a
rolling five-year
corporate-wide
ratio of 0.75:1 for
new active mining
disturbance to
rehabilitation by
2020; maintain
a ratio of 1:1 by
2030 to ensure no
net expansion in
new disturbance.

Bauxite residue
land requirements
per unit of alumina
produced – 15%
reduction by
2020 and 30%
reduction by 2030.

Recycle or reuse
15% of bauxite
residue generated
by 2020 and 30%
by 2030.

From a 2005
baseline, a 10%
reduction in the
energy intensity
of Global Primary
Products (that
includes AWAC
operations) by
2020 and 15%
by 2030.

AWAC’S SUSTAINABILITY
APPROACH

The process of aluminium smelting
requires significant amounts of electricity
resulting in GHG emissions. Process
efforts have been focused on reducing
direct emissions associated with
perflurorcarbons (PFCs) in the smelting
process and also opportunities to
reduce energy intensity.

BAUXITE TO ALUMINIUM PROCESS

Alumina is converted into aluminium by
dissolving it in an electrolytic bath of
molten cryolite (sodium aluminium
fluoride) within a large carbon or
graphite lined steel container known as
a “pot”. An electric current is passed
through the electrolyte at low voltage,
but very high current. Molten aluminium
is deposited at the bottom of the pot
and is siphoned off periodically. It can
be blended to an alloy specification,
cleaned and then generally cast. AWAC
operates a single smelter located at
Portland in Australia with an equity
capacity of 197,000 tonnes of metal.

LONG-TERM
SUSTAINABILITY
OBJECTIVES SET
BY ALCOA1

From a 2005
baseline, a 30%
reduction in
total (direct and
indirect) carbon
dioxide equivalent
intensity in Global
Primary Products
(which includes
AWAC’s refining
operations and the
Portland
aluminium smelter)
by 2020, and 35%
by 2030.

AWAC
BUSINESS

Smelting

END USE

The properties of aluminium such as combining strength and lightweight, the easy ability to form, its long-life and
little maintenance mean that it is in demand for a wide range of application used daily by people. Aluminium used
in transport reduces the weight, fuel consumption and greenhouse gas emissions. Building products that are
made from aluminium (alloys) are corrosion resistant, weather proof and virtually maintenance free over a long life
time. Aluminium used in packaging provides excellent protection of food and other products that are subject to
deterioration when exposed to light, oxygen, moisture and the risk of contamination from odours and micro-
organisms. Also, the light weighting aspect provides savings in transportation or increase volume of the product.

RECYCLING

First produced in 1888, aluminium has become the second most-used metal in the world after iron. Nearly
three-quarters of all aluminium ever made remains in use today, representing a growing ‘energy and resource
bank’, and the metal can be recycled and reused endlessly. While AWAC is not involved in recycling of aluminium,
it is important to appreciate that end product from AWAC’s business can be easily recycled. Examples of areas
where aluminium helps people and the economy to operate effectively and efficiently include air, road, rail and
sea transport; food and medicine; packaging; construction; electronics and electricity transmission.

1. Alcoa, through their sustainaiblity management processes, developed global sustainability objectives that are measured from a global business

perspective. The sustainability objectives relate to Alcoa’s Global Primary products business of which, the AWAC assets form a substantial part of that
business. However, that business included, at the time of developing these objectives, Alcoa’s global aluminium smelting operations. The Portland
smelter, that is part of AWAC, in 2005 had relatively low direct emissions and its continuous improvement will contribute to the Alcoa goal.

Directors’ Report

The Directors present their report on the consolidated entity consisting of
Alumina Limited (the Company) and the entities it controlled at the end of,
or during, the year ended 31 December 2015 (the Group).

DIRECTORS

Unless otherwise indicated, the following persons were Directors of the Company during the whole
of the financial year and up to the date of this report:

G J Pizzey (Chairman)

P C Wasow (Managing Director and Chief Executive Officer)

E R Stein

C Zeng

W P Day

M P Ferraro

BOARD OF DIRECTORS

The Company’s Directors in office as at 31 December 2015 were:

MR G JOHN PIZZEY
B.E (CHEM), DIP. MGT., FTSE, FAICD
Independent Non-Executive Director and Chairman

Mr Pizzey was elected a Director of the Company on
8 June 2007. He is a Non-Executive Director of Orora
Limited (appointed December 2013) and former Non-
Executive Director and Chairman of Iluka Resources Ltd
(appointed November 2005 and resigned December 2013)
and a former Non-Executive director of Amcor Limited
(appointed September 2003 and resigned December 2013).

Mr Pizzey is a life governor of Ivanhoe Grammar School
and a former chairman and director of the London Metal
Exchange. He is a member of the Audit and Risk
Management Committee (formerly known as the Audit
Committee) and of the Nomination and Compensation
Committees and was Chair of the then Audit Committee
to 30 November 2011. Mr Pizzey has extensive business
experience including 33 years as an executive in the
alumina and aluminium industries.

MS EMMA R STEIN
BSC (PHYSICS) HONS, MBA, FAICD, HON FELLOW WSU
Independent Non-Executive Director

Ms Stein was elected as a Director of the Company on 3
February 2011. Ms Stein is currently a Non-Executive
Director of Diversified Utilities Energy Trust (appointed
June 2004), Programmed Maintenance Services Ltd
(appointed June 2010), and Transpacific Industries Group
Ltd (appointed August 2011). She is a former Non-
Executive Director of Transfield Services Infrastructure
Fund (appointed October 2010 and resigned July 2011)
and Clough Limited (appointed July 2008 and resigned
December 2013). Formerly the UK Managing Director for

French utility Gaz de France’s energy retailing operations,
Ms Stein moved to Australia in 2003. Before joining Gaz
de France she was UK Divisional Managing Director for
British Fuels.

Ms Stein is Chair of the Compensation Committee
since 1 January 2014, current member and former
Chair of the Audit and Risk Management Committee
(Chair 28 November 2013 to 31 December 2013), and
current member and former Chair of the Nomination
Committee (Chair 3 March 2011 to February 2014). As a
senior executive, she gained considerable international
experience in management and leadership, strategy
development and implementation in global industrial,
energy and utilities markets. She has over a decade of
experience as a listed non-executive director and board
committee chair for capital intensive companies spanning
resources, oil and gas and related sectors.

MR PETER C WASOW
BCOM, GRADDIPMGMT, FCPA
Managing Director and Chief Executive Officer

Mr Wasow was appointed Managing Director and Chief
Executive Officer effective from 1 January 2014. He has
responsibility for the overall management of Alumina
Limited in accordance with the strategy, policies and
business processes adopted by the Board. Prior to his
appointment as CEO, Mr Wasow was a Non-Executive
Director of the Company, appointed on 26 August 2011
and was a member of the Nomination Committee and
Compensation Committee and a former member and
Chair of the then Audit Committee (December 2011 to
November 2013).

DIRECTORS

Mr G John Pizzey

Ms Emma R Stein

Mr Peter C Wasow

Mr Wasow served more than eight years at major
Australian oil and gas producer Santos Limited from
2002 to 2010. Initially appointed as CFO, he assumed
the additional role of Executive Vice President from 2008.
Prior to joining Santos in 2002, Mr Wasow held several
senior roles over a 23 year career at BHP including Vice
President of Finance. Mr Wasow brings to the Board
extensive financial skills and experience in the resource
and energy industries.

MR CHEN ZENG
MIF
Non-Executive Director

Mr Zeng was appointed as a Director of the Company
on 15 March 2013. He is a member of the Nomination,
Compensation and Audit and Risk Management
Committees (appointed 7 August 2014).

Mr Zeng is also currently a director of CITIC Pacific
Limited, Chief Executive Officer of CITIC Pacific Mining
and Chief Executive Officer of CITIC Mining International,
the new holding company of CITIC Pacific Mining. He is a
former director of CITIC Limited (listed on the Hong Kong
Exchange), CITIC Dameng (listed on the Hong Kong
Exchange), Macarthur Coal Limited (2007 to 2011) and
Marathon Resources Limited (resigned 31 January 2014).
Mr Zeng also served as a director on the Board of CITIC
Group between 2010 and 2011.

Before joining CITIC Pacific Mining, Mr Zeng was the Vice
Chairman and CEO of CITIC Resources, a CITIC Group
controlled Hong Kong listed company focused on crude
oil production, metal mining and refining, and commodity
trading. Mr Zeng is also the Chairman of CITIC Australia.
Mr Zeng has over 26 years of experience in project
development, management, and a proven record in
leading cross-cultural professionals in the resources
sector. He has been working in Australia since 1994 and
has extensive experience in various industries including
aluminium smelting and coal mining.

MR W PETER DAY
LLB (HONS), MBA, FCA, FCPA, FAICD
Independent Non-Executive Director

Mr Day was appointed as a Director of the Company on
1 January 2014. He is a member of the Nomination and
Compensation Committees and is Chair of the Audit and
Risk Management Committee. Mr Day is also currently a
Non-Executive Director of Ansell Limited (appointed
August 2007), SAI Global Limited (appointed August 2008),
and Boart Longyear Limited (appointed February 2014),
and a former director of Federation Centres (October 2009
– February 2014) and Orbital Corporation Limited (August
2007 – February 2014). Mr Day brings extensive
experience in the resource, finance and manufacturing
sectors, having held a number of senior positions with
Bonlac Foods, Rio Tinto, CRA, Comalco and the Australian
Securities and Investments Commission. He is a former
CFO of Amcor Limited.

MR MICHAEL P FERRARO
LLB (HONS) INDEPENDENT
Non-Executive Director

Mr Ferraro was appointed a Non-Executive Director of
the Company on 5 February 2014. He is a member of
the Audit and Risk Management and Compensation
Committees and is Chair of the Nomination Committee.

Mr Ferraro is Partner, Client Development-Asia Pacific
at Herbert Smith Freehills, a global law firm, and was
formerly head of the Corporate Group at the firm. He
was also a member of their executive management team.
Between 2008 and 2010 Mr Ferraro was Chief Legal
Counsel at BHP Billiton Ltd.

Mr Ferraro has considerable experience in the resources
sector and has over 30 years of experience in joint
ventures, mergers and acquisitions, fund raising, and
regulatory issues across a wide range of sectors and
countries. He also has considerable experience in the
commercial and financing aspects of large transactions
gained from a number of years in investment banking as
a corporate adviser.

Mr Chen Zeng

Mr W Peter Day

Mr Michael P Ferraro

COMPANY SECRETARY

MEETINGS OF DIRECTORS

MR STEPHEN FOSTER
BCOM LLB (HONS) GDIPAPPFIN (SEC INST)
GRADDIP CSP, ACIS
General Counsel/Company Secretary

Mr Foster is responsible for legal, company secretarial,
shareholder services, insurance and human resources.
He has a wide range of legal and commercial experience
gained over 30 years, more recently at Village Roadshow
and WMC Limited, after working with the legal firm of
Arthur Robinson & Hedderwicks (now Allens).

The appointment of the Company Secretary/General
Counsel is ratified by the Board. As defined in the Board
Charter, the Company Secretary is accountable directly
to the Board, through the Chair, on all matters to do with
the proper functioning of the Board.

The role of Company Secretary/General Counsel in
Alumina Limited includes:

• providing legal advice to the Board and management

as required

• advising the Board on corporate governance principles

• generally attending all Board meetings and preparing

the minutes

• monitoring that the Board and Committee policies

and procedures are followed

• facilitating the induction of Directors

• managing compliance with regulatory requirements.

Particulars of the numbers of meetings of the Company’s
Directors (including meetings of committees of Directors)
during the financial year, and the number of those
meetings attended by each Director (as applicable),
are detailed in the table below.

INTERESTS OF DIRECTORS

Particulars of relevant interests in shares in the Company
or in any related body corporate held by the Directors of
the Company as at the date of this report are set out
in the Remuneration Report on page 62 of this report.
Particulars of rights or options over shares in the Company
or in any related body corporate held by the Directors of
the Company as at the date of this report are set out in
the Remuneration Report on page 61 of this report.

INSURANCE OF OFFICERS

During or since the end of the financial year, the Group
has paid the premiums in respect of a contract to insure
Directors and other officers of the Group against liabilities
incurred in the performance of their duties on behalf of
the Group.

The officers of the Group covered by the insurance policy
include any natural person acting in the course of duties
for the Group who is or was a Director, secretary or
executive officer as well as senior and executive staff.
The Company is prohibited, under the terms of the
insurance contract, from disclosing details of the nature
of liability insured against and the amount of the premium.

ALUMINA LIMITED DIRECTORS’ ATTENDANCE AT MEETINGS JANUARY TO DECEMBER 2015

Board Meeting

Board
Committee meetings

Audit and Risk
Management
Committee meetings

Compensation
Committee meetings

Nominations
Committee meetings

Eligible to

attend Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Directors

G J Pizzey

E R Stein

C Zeng

P Day

M Ferraro

P Wasow

INDEMNITY OF OFFICERS

Rule 75 of the Company’s Constitution requires the
Company to indemnify each officer of the Company (and,
if the Board of the Company considers it appropriate, any
officer of a wholly owned subsidiary of the Company) out
of the assets of the Company against any liability incurred
by the officer in or arising out of the conduct of the
business of the Company or the relevant wholly-owned
subsidiary or in or arising out of the discharge of the duties
of the officer, where that liability is owed to a person other
than the Company or a related body corporate of the
Company.

This requirement does not apply to the extent that the
liability arises out of conduct on the part of the officer
which involved a lack of good faith, or to the extent that
the Company is otherwise precluded by law from
providing an indemnity. It also does not apply to the extent
and for the amount that the officer is not otherwise entitled
to be indemnified and is not actually indemnified by
another person (such as an insurer under any insurance
policy). Officer in this context means: a director, secretary,
senior manager or employee; or a person appointed as a
trustee by, or acting as a trustee at the request of, the
Company or a wholly owned subsidiary of the Company,
and includes a former officer. The Constitution also
permits the Company, where the Board considers it
appropriate, to enter into documentary indemnities in
favour of such officers. The Company has entered into
such Deeds of Indemnity with each of the Directors,
which indemnify them consistently with rule 75 of the
Constitution.

DIVIDENDS

Details of the dividends paid to members of the Company
during the financial year are referred to in Note 6 of the
Consolidated Financial Statements found on page 81.

PRINCIPAL ACTIVITIES

The principal activities of the Group relate to its 40 per
cent interest in the series of operating entities forming
AWAC. AWAC has interests in bauxite mining, alumina
refining, and aluminium smelting. There have been no
significant changes in the nature of the principal activities
of the Group during the financial year.

REVIEW OF OPERATIONS AND RESULTS

The financial results for the Group include the 12 month
results of AWAC and associated corporate activities.

The Group’s net profit after tax for the 2015 financial year
attributable to members of the Company was $88.3 million
profit (2014: $98.3 million net loss).

Excluding significant items, there would have been a net
profit after tax of $258.2 million (2014: $91.1 million). For
further information on the operations of the Group during
the financial year and the results of these operations refer
to the Operating and Financial Review on pages 18 to 31
of this report.

MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR

Other than as reported in Note 15 of the Consolidated
Financial Statements (refer to page 89), there are
no significant matters or circumstances events
that have arisen since the end of the financial year
that have significantly affected, or may significantly
affect, the Group’s operations, the results of those
operations, or the Group’s state of affairs, in the
financial years subsequent to the financial year ended
31 December 2015.

LIKELY DEVELOPMENTS

In the opinion of the Directors, it would prejudice the
interests of the Group to provide additional information,
except as reported in this Directors’ Report, relating to
likely developments in the operations of the Group and the
expected results of those operations in the financial years
subsequent to the financial year ended 31 December 2015.

ENVIRONMENTAL REGULATION

AWAC’s Australian operations are subject to various
Commonwealth and state laws governing the protection
of the environment in areas such as air and water quality,
waste emission and disposal, environmental impact
assessments, mine rehabilitation, and access to and
use of ground water.

In particular, most operations are required to be licensed
to conduct certain activities under the environmental
protection legislation of the state in which they operate,
and such licences include requirements specific to the
subject site.

ROUNDING OF AMOUNTS

The Company is of a kind referred to in the Australian
Securities and Investments Commission Class Order
98/100. Amounts shown in the Financial Report and this
Directors’ Report have been rounded off to the nearest
hundred thousand dollars, except where otherwise
required, in accordance with that Class Order.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes in the state
of affairs of the Group during the financial year.

AUDITOR

PricewaterhouseCoopers continues in office,
in accordance with the Corporations Act 2001 (Cth)
(Corporations Act).

A copy of the Auditor’s Independence Declaration
as required under section 307C of the Corporations
Act 2001 is set out below.

NON-AUDIT SERVICES

The Group may decide to employ the auditor on
assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the
Company and/or the Group are important. Details
of the amounts paid or payable to the auditor
(PricewaterhouseCoopers) for audit and non-audit
services provided by (or on behalf of) the auditor and
its related practices are disclosed in Note 13 of the
Notes to the Consolidated Statement in the Financial
Report on page 89.

The Board of Directors has considered the position and,
in accordance with advice received from the Audit and
Risk Management Committee, is satisfied that the
provision of non-audit services during the financial

year by (or on behalf of) the auditor and its related
practices, is compatible with the general standard of
independence for auditors imposed by the Corporations
Act. The Directors are satisfied that the provision of those
non-audit services did not compromise the auditor
independence requirements of the Corporations Act 2001
for the following reasons:

• All non-audit services have been reviewed by the Audit

and Risk Management Committee to ensure they do not
impact the impartiality and objectivity of the auditor

• None of the services undermine the general principles

relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.

The fees paid or payable during the financial year for
services provided by (or on behalf of) the auditor of
the parent entity are disclosed in Note 13 of the Notes
to the Consolidated Statement in the Financial Report
on page 89.

CORPORATE GOVERNANCE STATEMENT

The Company has, for the 2015 reporting year, elected
to disclose the Corporate Governance Statement only
on the Company web site. The Corporate Governance
Statement can be found at URL www.aluminalimited.com/
governance/

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of Alumina Limited for the year ended 31 December 2015, I declare that to the best of my
knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Alumina Limited and the entities it controlled during the period.

NADIA CARLIN
Partner

Melbourne
15 March 2016
PricewaterhouseCoopers

Liability limited by a scheme approved under Professional Standards Legislation

Operating and
Financial Review

Operating and

Financial Review

Note regarding non-IFRS financial information

The Operating and Financial Review contains certain non-IFRS financial information.
This information is presented to assist in making appropriate comparisons with prior
year periods and to assess the operating performance of the business.

Alcoa World Alumina & Chemicals (AWAC) financial information, except as stated
below, is extracted from audited financial statements prepared in conformity with
accounting principles generally accepted in the United States of America.

CONTENTS

1. Strategy and Business Model
2. Principal Risks
3. Review of AWAC Operations
4. AWAC Financial Review
5. Alumina Limited Financial Review
6. Market Outlook and Guidance

19
21
22
25
27
29

The Operating and Financial Review should be read in conjunction with the financial statements, which are presented
on pages 63 to 95 of this annual report.

1. STRATEGY AND BUSINESS MODEL

BUSINESS MODEL

Alumina Limited’s sole business undertaking is in the
global bauxite, alumina and aluminium industry, which it
conducts primarily through bauxite mining and alumina
refining, with some minor alumina-based chemicals
businesses, aluminium smelting and the marketing of
those products. All of those business activities are
conducted through its 40% investment in AWAC.

Alumina Limited’s net profit/(loss) is principally comprised
of a return on its equity investment, and revenues are
limited to small amounts of interest income and occasional
one-off revenues.

AWAC was formed on 1 January 1995 by Alumina Limited
and Alcoa Inc (Alcoa) combining their respective global
bauxite, alumina and alumina-based chemicals business
and investments and their respective aluminium smelting
operations in Australia. AWAC is the world’s largest
producer of alumina and miner of bauxite. Alumina
Limited’s partner in AWAC is Alcoa, which owns the
remaining 60% and manages the day-to-day operations.

This partnership provides investors with a direct
investment in the alumina and bauxite industry.

The Strategic Council is the principal forum for Alcoa and
Alumina Limited to provide direction and counsel to the
AWAC entities in respect of strategic and policy matters.
The Alcoa and Alumina Limited representatives on the

Boards of the AWAC entities are required, subject to their
general fiduciary duties, to carry out the directions and the
decisions of the Strategic Council. The Strategic Council
has five members, three appointed by Alcoa (of which one
is Chairman) and two by Alumina Limited (of which one is
the Deputy Chairman). Decisions are made by majority
vote except for matters which require a “super majority”
vote, which is a vote of at least 80% of the members
appointed to the Strategic Council.

The following decisions require a super majority vote:

• change of the scope of AWAC.

• change in the minimum 30% dividend policy.

• sale of all or a majority of the assets of AWAC.

• equity calls on behalf of AWAC totalling, in any one year,

in excess of $1 billion.

• loans to Alcoa, Alumina Limited or their affiliates by

AWAC entities (including loans between AWAC entities).

Under the general direction of the Strategic Council,
Alcoa is the “industrial leader” and provides the operating
management of AWAC and of all affiliated operating
entities within AWAC.

Alumina Limited is entitled to representation in proportion
to its ownership interest on the Board of each entity in the
AWAC structure and is currently represented on Alcoa

of Australia Ltd (AofA), Alcoa World Alumina Brazil Ltda
(AWA Brazil) and Alcoa World Alumina LLC (AWA LLC).
In addition to the Strategic Council meetings, Alumina
Limited’s management and Board visit and review AWAC’s
operations each year.

Subject to the provisions of the AWAC agreements, AWAC
is the exclusive vehicle for the pursuit of Alumina Limited’s
and Alcoa’s (and their related corporations as defined)

interests in the bauxite, alumina and inorganic industrial
chemicals businesses, and neither party can compete with
AWAC so long as they maintain an ownership interest in
AWAC. In addition, Alumina Limited may not compete with
the businesses of the integrated operations of AWAC
(being the primary aluminium smelting and fabricating
facilities and certain ancillary facilities that existed at the
formation of AWAC).

ALCOA WORLD ALUMINA & CHEMICALS

BAUXITE MINES

ALUMINA REFINERIES

ALUMINIUM SMELTERS

ALUMINA CHEMICALS

SHIPPING OPERATIONS

ALL OPERATIONS 100% OWNED, UNLESS OTHERWISE INDICATED

Australia
Kwinana, Pinjarra
& Wagerup

Australia
Portland (55%)

Australia
Kwinana

Spain
San Ciprian

USA
Point Comfort

Brazil
Sao Luis (39%)

Spain
San Ciprian

Suriname
Paranam (fully
curtailed)

USA
Point Comfort

Saudi Arabia
Ras Al Khair (25.1%)

Refineries:
Five refineries are
located in proximity
to bauxite deposits.

Australia
Huntly & Willowdale

Brazil
Trombetas (9.6%)
& Juruti

Guinea
Sangaredi (23%)

Suriname
Moengo, Klaverblad
& Kaimangrassie
(fully curtailed)

Saudi Arabia
Al Ba'itha (25.1%)

Bauxite deposits:
AWAC’s bauxite
deposits have long
term mining rights.
Bauxite mining is
planned on an
incremental basis after
detailed assessment of
the deposits to achieve
a uniform quality in the
supply of blended
feedstock to the
relevant refinery.

Smelters:
The Portland
aluminium smelter
is supplied alumina
by the Australian
refineries.

Alumina Chemicals:
The Kwinana, Point
Comfort and San
Ciprian refineries
produce chemical
grade alumina as
well as smelter
grade alumina.

Shipping Operations:
AWAC’s shipping
operations use owned
and chartered vessels
to transport dry and
liquid bulk cargoes,
including bauxite,
alumina, caustic
soda, fuel oil,
petroleum, coke
and limestone.

STRATEGY ANALYSIS

AWAC is primarily focused on bauxite and alumina assets,
and this is the key investment concern of Alumina Limited.
That is, to invest in long-life, low cost bauxite and alumina
assets through AWAC.

Alumina Limited and Alcoa are different companies
with different shareholders and different governance
requirements. While AWAC is governed by constitutional
documents, in a practical sense, the reconciliation of
the differing interests requires challenge, debate and

negotiation. To do this well, Alumina Limited needs to
have (and has) an independent understanding of the
bauxite, alumina and aluminium market and views on the
impact of changes in the market, in particular around
capacity investment, pricing and the development of the
Chinese industry. Through the role of Alumina Limited
representatives on the Strategic Council and AWAC-
entity Boards and working with Alcoa, Alumina Limited
contributes to the strategic and high-level commercial
actions of AWAC.

2. PRINCIPAL RISKS

The risk management processes are summarised in the
Corporate Governance Statement located on the Company
web site at www.aluminalimited.com/governance/.

Alumina Limited’s risk management framework provides
for the production of a Group risk matrix, which sets out
Alumina Limited’s most significant risks and the steps
taken to mitigate those risks. These risks are rated on the
basis of their potential impact on the current operations
and profitability and/or the long term value of the Group.
Set out below are some of the key risks faced by Alumina
Limited. However, there are other risks not listed below
associated with an investment in Alumina Limited.

• Movements in the market prices of bauxite, alumina and

aluminium – AWAC’s, and hence Alumina Limited’s,
performance is heavily dependent on the market prices
of bauxite, alumina and aluminium, which are affected
by numerous factors outside Alumina Limited’s control.
These include the overall performance of world
economies, the related cyclicality of industries that are
significant consumers of aluminium and movement in
production disproportionate to demand (whether as a
result of changes to production levels at existing facilities
or the development of new facilities). A fall in the market
prices of bauxite, alumina and aluminium can adversely
affect Alumina Limited’s financial performance. AWAC
and Alumina Limited generally do not undertake hedging
to manage this price risk.

• Fluctuations in exchange rates – while a significant

proportion of AWAC’s costs are incurred in Australian
dollars, its sales are denominated in US dollars.
Accordingly, AWAC and Alumina’s Limited’s future
profitability can be adversely affected by a strengthening
of the Australian dollar against the US dollar and a
strengthening against the US dollar of other currencies in
which operating or capital costs are incurred by AWAC
outside Australia, including the Brazilian Real. Also,
given that China is a significant part of the world alumina
and aluminium markets, fluctuations in the Chinese
Renminbi against the US dollar could have some impact
on other parts of the industry. AWAC and Alumina
Limited generally do not undertake hedging to
manage this risk.

• Increase in AWAC’s production costs or a decrease
in production – AWAC’s operations are subject to
conditions beyond its control that may increase its costs
or decrease its production, including increases in the
cost of key inputs (including energy, raw materials labor
and freight), the non-availability of key inputs (including
secure energy), weather and natural disasters, fires or
explosions at facilities, unexpected maintenance or
technical problems, key equipment failures, disruptions
to or other problems with infrastructure and supply.
In addition, industrial disruptions, work stoppages,
refurbishments and accidents at operations may
adversely affect profitability. Some cost inputs are
subject to term contracts to increase the certainty of
input pricing. AWAC’s operating and maintenance
systems and business continuity planning seek to
minimise the impact of non-availability of key inputs.

• AWAC structure – Alumina Limited does not hold a
majority interest in AWAC, and decisions made by
majority vote may not be in the best interests of Alumina
Limited. Other than certain key decisions which require
Alumina Limited’s consent, AWAC’s decisions are by
majority vote. Alcoa has a 60% interest in AWAC and
has the majority vote.

• Greenhouse gas emission regulation – energy,

specifically electricity, is a significant input in a number
of AWAC’s operations, making AWAC an emitter of
greenhouse gases. The introduction of regulatory
change by governments in response to greenhouse gas
emissions may represent an increased cost to AWAC
and may affect Alumina Limited’s profitability.

• Political, legal and regulatory impacts – AWAC and

Alumina Limited operate across a broad range of legal,
regulatory or political systems. The profitability of those
operations may be adversely impacted by changes in
the regulatory regimes. AWAC and Alumina Limited’s
financial results could be affected by new or increasingly
stringent laws, regulatory requirements or
interpretations, or outcomes of significant legal
proceedings or investigations adverse to AWAC or
Alumina Limited. This may include a change in effective
tax rates or becoming subject to unexpected or rising
costs associated with business operations or provision
of health or welfare benefits to employees, regulations
or policies. AWAC is also subject to a variety of legal
compliance risks. These risks include, among other
things, potential claims relating to product liability, health
and safety, environmental matters, intellectual property
rights, government contracts, taxes and compliance
with US and foreign export laws, anti-bribery laws,
competition laws and sales and trading practices. Failure
to comply with the laws regulating AWAC’s businesses
may result in sanctions, such as fines or orders requiring
positive action by AWAC, which may involve capital
expenditure or the removal of licenses and/or the
curtailment of operations. This relates particularly to
environmental regulations. Alumina Limited and AWAC
undertake a variety of compliance training and
governance functions to mitigate these risks.

• Closure/impairment of assets – Alumina Limited may
be required to record impairment charges as a result
of adverse developments in the recoverable values of
its assets. To the extent that the recoverable value of
an asset is impaired, such impairment may negatively
impact Alumina Limited’s profitability during the
relevant period. Closure, curtailment or sale of AWAC’s
operations may result in an impairment being incurred
as a result of the carrying value of an asset exceeding
its recoverable value.

• Customer risks – AWAC’s relationships with key

customers for the supply of alumina (including Alcoa)
are important to AWAC’s financial performance. The loss
of key customers or changes to sales agreement could
adversely affect AWAC’s and Alumina Limited’s financial
performance.

• Debt refinancing – Alumina Limited’s ability to refinance

• Chinese growth slowing further and affecting aluminium

its debt on favorable terms as it becomes due or to
repay its debt, its ability to raise further finance on
favorable terms, and its borrowing costs, will depend
upon a number of factors, including AWAC’s operating
performance, general economic conditions, political,
capital and credit market conditions, external credit
ratings and the reputation, performance and financial
strength of Alumina Limited’s business. If a number of
the risks outlined in this section eventuate (including
the cyclicality of the alumina industry and adverse
movements in the market prices of aluminium and
alumina) and Alumina Limited’s operating performance,
external credit rating or profitability is negatively
impacted as a result of these risks, there is a risk that
Alumina Limited may not be able to refinance any
expiring debt facilities or the costs of refinancing its
debt may increase substantially.

Other risks include:

• an alumina market in supply surplus at a time of

continuing relatively low aluminium prices, may lead
to further smelting production cuts and lower demand
for alumina;

consumption and hence aluminium and alumina
demand;

• a greater Chinese aluminium production at lower cost,
combined with lower demand in China, may lead to a
greater level of Chinese primary aluminium and semi-
finished product exports, depressing the world prices
of aluminium;

• Alcoa and its subsidiaries have a variety of obligations
to Alumina Limited and AWAC, the fulfilment of which
depends on their financial position. Adverse changes
to the financial position of Alcoa could result in such
obligations not being met;

• a greater outflow of aluminium stocks from warehouses’

inventories could impact the world alumina market;

• a sustained increase in the supply of cheap bauxite

from Asia to China, that could lower Chinese alumina
production costs;

• a technology breakthrough that could lower Chinese

alumina production costs.

3. REVIEW OF AWAC OPERATIONS

DIAGRAM OF ALCOA WORLD ALUMINA AND CHEMICALS (AWAC) OPERATIONS AND INTERESTS

San Ciprian

Sangaredi

Ras Al Khair
Al Ba’itha

Kwinana

Huntly

Pinjarra

Willowdale

Wagerup

2 2

Point Comfort

Paranam

Trombetas

Sao
Luis

Juruti

Portland

Bauxite mines

Refineries

Smelter

Location

MINING

In January 2015, Alcoa Inc restructured its businesses
which included the creation of mining as a separate unit,
although it still falls under the alumina reporting segment.
This new business unit is predominantly represented by
the AWAC mining operations and interests.

AWAC owns, or partly owns bauxite mines currently
operating in four countries that meet the production needs
of the AWAC refineries.

AWAC’s own mines produced 38.0 million bone dry tonnes
(BDT) of bauxite, a decrease of 0.9 million tonnes mostly
related to the curtailment of the mine in Suriname.

Alumina Production (kt)

15,902

(640)

117

(402)

15,085

Bauxite Production (million bdmt)

31.7

4.7

1.6

3.4

2014 Jamalco Pinjarra
Wagerup
Kwinana

Sao
Luis

San
Ciprian

Suralco Point

2015

Comfort

38.0 from
own mines

5.0 proportional
equity basis*

Australia

Brazil

Suriname

Brazil

Guinea

* Mines in which AWAC has an equity interest are included if they
supply refineries operated by AWAC.

During 2015, AWAC sold to third parties 2.0 million BDT of
bauxite and purchased 1.1 million BDT from third parties.
Also, the Government of Western Australia granted
permission to export trial shipments from AWAC’s Western
Australian mines. The first trial shipment is scheduled in
early 2016. In addition, AWAC has put in place contracts
for 2016 to sell excess volume resulting from the refining
curtailments.

Average mine costs per tonne were lower than 2014 levels,
primarily due to the strengthening of the US dollar against
the Australian dollar and the Brazilian Real.

REFINING

Production of alumina was 15.1 million tonnes in 2015,
compared to 15.9 million tonnes in 2014. Production was
lower due to the sale of the Jamalco refinery in the second
half of 2014 and the curtailment of production at the
Suralco refinery, which was partly offset by higher
production at the Point Comfort and San Ciprian refineries.
Production at the other refineries was almost unchanged at
10.8 million tonnes.

Alumina shipments were 15.5 million tonnes in 2015,
compared to 15.9 million tonnes in 2014 and include
approximately 0.3 million tonnes of purchased tonnes
that were on sold to third parties.

Approximately 75% of third party smelter grade alumina
shipments (excluding purchased tonnes) were priced on
spot or alumina indexed basis for 2015 compared to 68%
for 2014. For 2016, shipments (excluding purchased
tonnes) on a spot or alumina indexed basis are expected
to be approximately 85% of the total.

Revenue per tonne from smelter grade alumina sales
priced by reference to indices and spot continued to be
higher than the legacy LME-linked contracts in 2015.

The average three-month LME aluminium price,
determined on a two-month lag basis, decreased by 5.4%
in 2015 compared to 2014, and the average alumina price
index FOB Australia (one month lag) decreased by 4.3%.

The net result was that 2015 average realised alumina
prices decreased by 3.0% to $296 per tonne compared
to $305 per tonne in 2014.

Average Alumina Realised Price Per Tonne

$305

($5)

($2)

$296

2014

API / Spot
Price

Legacy LME
Price

Mix

2015

2 3

AWAC’s average 2015 cash cost per tonne of alumina
produced (which includes the mining business unit at cost)
decreased by 13.3% to $216 per tonne, largely assisted by
the stronger US dollar.

Approximately two dollars per tonne reduction is a result
of the sale of the high cost Jamalco refinery during 2014.

The balance of the decrease was predominantly due
to lower energy costs driven by lower prices and the
conversion of the San Ciprian refinery to natural gas
from fuel oil.

There were also cost benefits from lower mining costs
and productivity initiatives in raw materials that more than
offset their higher usage. Lower caustic prices more than
offset increased usage in Suralco due to bauxite quality as
the refinery and mine were curtailed.

Cash Cost Per Alumina Tonne Produced

$249

($2)

($15)

($3)

($10)

$216

2014
Cash
CAP

Jamalco Energy Caustic Bauxite Conversion* 2015
Cash
CAP

* Conversion includes: employee costs, indirect costs and
other raw materials costs.

The alumina EBITDA margin (which includes the mining
business unit at cost) was $91 per tonne of alumina
produced in 2015, an increase of $37 per tonne compared
to 2014. Increased margins were a result of the lower costs
more than offsetting lower prices.

SMELTING

Production of approximately 163,000 tonnes was lower
than 2014 due to the closure of the Point Henry smelter on
1 August 2014. The Portland smelter is the remaining
smelting operation in the AWAC portfolio.

Portland contributed $30.9 million in EBITDA, at a margin
of $188 per tonne of aluminium produced.

Portland’s 2015 average cash cost of aluminium per tonne
produced decreased by 9.1% to $1,589 per tonne, mainly
due to the weaker Australian dollar against the US dollar.
The average realised price decreased by 14.9% to
$1,911 per tonne.

PORTFOLIO RESTRUCTURING
AND REPOSITIONING

During 2015, there were a number of events that are
related to the restructuring and repositioning of AWAC’s
portfolio in order to improve the quality of returns.

In January, the mining business unit was established,
recognising the growing commercial value of bauxite, the
extensive resource available to AWAC and the mining
capabilities and infrastructure capacity of AWAC, adding
another dimension to the existing operations of AWAC.

In March, Alcoa Inc initiated a 12 month review of
2.8 million tonnes in refining capacity that includes AWAC
refineries for possible curtailment (partial or full),
permanent closure or divestiture. As a part of this review:

• In March, AWAC curtailed 0.443 million tonnes per year
(one digester) of capacity at the Suralco (Suriname)
refinery. This curtailment was completed by the end of
April. In September, Alcoa Inc announced that it planned
to curtail the remaining capacity of 0.887 million tonnes
(two digesters) at Suralco. The curtailment was
completed by the end of November. Alcoa Inc is
currently in discussions with Suriname government to
determine the best long-term solution for Suralco due to
limited bauxite reserves and the absence of a long-term
energy alternative.

• In November, AWAC partly curtailed 1.2 million tonnes of
refining capacity at Point Comfort refinery in Texas, USA.

• In January 2016, AWAC announced the decision to

curtail 1.0 million tonnes of alumina refining capacity by
the end of the second quarter 2016. The curtailment
includes the remaining 0.8 million tonnes of production
capacity at the Point Comfort.

In May, Alcoa of Australia Limited decided to permanently
close the Anglesea coal mine and power station, which
was completed during August. Demolition and remediation
activities related to Anglesea power station have begun
and are expected to be completed by the end of 2020.

AWAC’s total charges associated with the portfolio
restructuring and repositioning was $385.4 million post-tax
compared to $479.0 million post-tax for 2014.

In April, Alcoa of Australia Limited, an AWAC entity,
secured a 12 year gas supply agreement to power its
alumina refineries in Western Australia, beginning in July
2020. This gas supply agreement secures the low cost
position of AWAC’s Australian alumina refining business.
This agreement brings to almost 75% the amount of gas
now secured by Alcoa of Australia Limited to replace
existing gas supply agreements which expire at the end of
the decade.

During December 2014, the Ma’aden refinery began
operating using bauxite from its own mine. The refinery
produced 846 thousand tonnes (AWAC’s share is
212 thousand tonnes) of alumina in 2015 and should be
one of the lowest cash production cost per tonne refineries
in AWAC’s portfolio. The 2015 results included $46.5
million of equity losses related to start and ramp up
activities compared to $33.9 million in 2014.

The San Ciprian refinery in Spain completed its conversion
of energy source from oil to natural gas in February. As a
result of the conversion, San Ciprian’s production costs
should be $20 per tonne lower, compared to historic levels.

4. AWAC FINANCIAL REVIEW

AWAC BALANCE SHEET (US GA AP)

Cash, cash equivalents

Receivables

Related party note receivable

Inventories

Property, plant & equipment

Other assets

Total Assets

Short term borrowings

Payables

Taxes payable and deferred

Capital lease obligations & long term debt

Other liabilities

Total Assets

Equity

2015
US$m

531.8

329.1

113.6

436.8

3,691.8

2,032.5

7,135.6

10.0

635.8

306.3

3.6

1,308.8

2,264.5

4,871.1

2014
US$m

238.2

524.6

88.9

550.7

4,772.3

2,229.0

8,403.7

66.6

733.5

292.3

6.8

1,485.5

2,584.7

5,819.0

The value of assets and liabilities denominated in foreign
currencies has declined, mainly due to the effect of the
stronger US dollar particularly against the Australian dollar
and the Brazilian Real.

The decline in property, plant and equipment was further
affected by the closure of the Anglesea coal mine and
power station, restructuring of Suralco and Point Comfort,
and asset write-offs.

During 2015, Alcoa of Australia Limited secured a 12 year
gas supply agreement, beginning in July 2020, which
required a prepayment of $500 million to be made in two
instalments. The first instalment of $300 million was paid in
June 2015 and is reflected in other assets on the AWAC
consolidated balance sheet. The second instalment will be
made during the first half of 2016.

The movement in other assets also includes the decline in
value of derivative contracts of approximately
$100.9 million and a $195.5 million decline in deferred tax
assets of which $85 million relates to the revaluation of
certain deferred tax assets of Suralco, which mainly
related to employee benefits and the carry forward of tax
losses.

The reduction in other liabilities also reflects the $74 million
Alba settlement paid in January 2015. In accordance with
the allocation agreement with Alcoa Inc, AWAC funded
$2.9 million of this payment. The balance was funded by
Alcoa Inc as part of its assumption of the additional 25%
equity share of the Alba settlement payments and costs.
The remaining instalment payments totalling $222 million
will be fully funded by Alcoa Inc under the same
arrangement, of which $74 million was funded in January
2016.

The movement in other liabilities also includes the decline
in value of derivative contracts of approximately $94.3
million.

AWAC’s borrowings as at 31 December 2015, including
capital lease obligations, was $13.6 million, compared to
$73.4 million as at 31 December 2014. The majority of the
decline relates to Alumina Espanola SA’s repayment of
debt through improved operating performance of the San
Ciprian refinery. The majority of AWAC’s short term
borrowings is represented by the balance of Alumina
Espanola SA’s debt.

AWAC CASH FLOW (US GA AP)

Cash from operations

Capital contribution arising from the allocation agreement1

Capital contributions from partners

Net movement in borrowings

Capital expenditure

Other financing and Investing activities2

Effects of exchange rate changes on cash and cash equivalents

Cash flow before distributions

Distributions paid to partners

Net Change in cash and cash equivalents

2015
US$M

808.9

71.2

5.9

(49.6)

(178.4)

(54.1)

(42.3)

561.6

(268.0)

293.6

2014
US$M

475.9

53.4

89.3

(85.1)

(237.9)

66.2

(10.7)

351.1

(302.4)

48.7

1 Contributions by Alcoa Inc in accordance with the allocation agreement whereby Alcoa Inc assumes an additional 25% equity share relating to the Alba

settlement payments and costs.

2 Made up of changes to capital lease obligations, related party notes receivable and other.

Cash from operations includes the payment of the first
instalment of $300 million for the 12-year gas supply
agreement, $92.7 million of payments relating to significant
items (2014: $37.9 million) and payment for the Alba
settlement of $74 million (2014: $88 million).

Adjusting for all of the above and movements in working
capital, there would have been an increase in cash from
operations in line with the improvement in EBITDA,
excluding the significant items.

During 2015, sustaining capital expenditure was
$171.8 million compared to $234.9 million in 2014.
The majority of the expenditure related to the refineries.
Significant projects included residue filtration for the
Kwinana and Point Comfort refineries. The mining business
unit’s expenditure was $29 million in 2015, largely for haul
roads and the crusher relocation in Western Australia.

During 2015, growth capital expenditure was $6.6 million
compared to $3.0 million in 2014. The expenditure largely
related to creep production at the Western Australian
refineries.

AWAC PROFIT AND LOSS (US GA AP)

Net profit/(loss) after tax

Add back: Income tax charge1

Add back: Depreciation and Amortisation

Add back: Net interest

EBITDA

Add back: Significant items (pre-tax)

EBITDA excluding significant items

2015
US$M

318.2

367.1

302.9

1.3

989.5

375.0

1,364.5

2014
US$M

(243.0)

135.0

404.5

4.5

301.0

568.0

869.0

1 Includes $85.2 million deferred tax asset adjustment in 2015 in relation to the Suralco refinery curtailment. In 2014, Includes $52 million and $27 million

deferred tax assets adjustment in relation to the changes in Brazilian and Spanish tax rate respectively.

The AWAC’s net profit/(loss) was negatively affected by the following individually significant items:

SIGNIFICANT ITEMS (US GA AP)

Suriname restructuring charges

Point Comfort restructuring charges

Anglesea restructuring charges

Point Henry restructuring charges

Sale of interest in Jamalco

Capital work in progress write-offs

Gain on sale of gold mining interest in Suriname

Other (includes severance and redundancy payments)

Total significant items (pre-tax)

5. ALUMINA LIMITED FINANCIAL REVIEW

ALUMINA LIMITED PROFIT AND LOSS

Share of net profit/(loss) of associates accounted for using the equity method

General and administrative expenses

Finance costs

Other and tax

Profit/(loss) for the year after tax

Total significant items after tax

Net profit after tax excluding significant items

SIGNIFICANT ITEMS (POST-TA X)

Suriname restructuring charges and deferred tax assets adjustment

Point Comfort restructuring charges

Anglesea restructuring charges

Point Henry restructuring charges

Sale of interest in Jamalco

Capital work in progress write-offs

Gain on sale of gold mining interest in Suriname

Legal matters of associate

Portland impairment charge

Other (includes severance and redundancy payments)

Total significant items

2015
US$M

(178.4)

(85.7)

(68.2)

(2.0)

3.3

(33.0)

–

(11.0)

(375.0)

2015
US$M

109.9

(11.9)

(6.6)

(3.1)

88.3

169.9

258.2

2015
US$M

(88.4)

(34.3)

(15.4)

–

1.3

(9.2)

–

(20.0)

(3.9)

(169.9)

2014
US$M

–

(329.2)

(266.3)

–

27.5

–

(568.0)

2014
US$M

(73.6)

(13.5)

(13.6)

2.4

(98.3)

189.4

91.1

2014
US$M

–

(90.8)

(106.5)

–

7.2

0.7

–

(189.4)

Alumina Limited recorded a net profit after tax of
$88.3 million compared to a net loss of $98.3 million
in 2014.

The net profit was negatively affected by the equity share
of AWAC’s significant items totalling $169.9 million in 2015
(2014: $189.4 million). Significant items were largely the
result of restructuring activities to improve the portfolio
mix of AWAC. These activities included the curtailment
of the Suralco and Point Comfort refineries, closure of
the Anglesea coal mine and power station, Portland
impairment charge and AWAC asset write offs.

Excluding significant items, net profit would have been
$258.2 million (2014: $91.1 million profit). This improvement
is in line with the better operating performance of AWAC.

Most of Alumina Limited’s general and administrative costs
are incurred in Australian dollars. The decrease in costs
reflects both the weaker Australian dollar against the US
dollar and lower expenses.

Finance costs include interest expense, commitment fees
paid, net payments under cross currency interest rate
contracts, amortised upfront fees and bank charges.
Finance costs decreased to $6.6 million in 2015 from
$13.6 million in 2014 mainly due to lower average
borrowings and a lower average interest rate following the
refinancing of the Brazilian National Development Bank
(BNDES) loan with the A$125 million fixed rate note.

ALUMINA LIMITED CASH FLOW

Dividends received

Distributions received

Net finance costs paid

Payments to suppliers and employees

GST refund, interest received & other

Cash from operations

Net receipts – investments in associates

Free cash flow2

2015
US$M

61.4

1.5

(6.5)

(12.1)

(0.7)

43.6

41.0

84.6

2014
US$M

16.0

4.3

(12.5)

(15.0)1

(0.4)

(7.6)

57.4

49.8

1 Includes CEO retirement payments.

2 Free cash flow calculated as cash from operations less net investments in associates.

Alumina Limited’s free cash flow principally comprise the
net capital, dividends and income distributions received
from the AWAC entities offset by the Company’s general,
administrative and finance costs.

The $6.0 million reduction in finance costs paid is largely
due to lower net debt balances and lower interest rates
following the refinancing of the BNDES loan with the
A$125 million fixed rate note.

Alumina Limited’s total receipts from AWAC during 2015
were $106.3 million, compared to $119.2 million in 2014.
Dividends received in 2015 included an additional
$5.2 million arising from the sale of the interest in Jamalco
bauxite mine and alumina refinery, which was sold during
2014, with the balance of $56.2 million being received from
Alcoa of Australia Limited. Capital returns amounted to
$43.4 million during 2015, of which $33.7 million was
received from AWA Brazil and $9.7 million from the
Enterprise Partnership.

Alumina Limited’s cash contributions to AWAC during 2015
were $2.4 million, compared to $41.5 million in 2014,
including the reimbursement to Alcoa Inc of $5.4 million
being the Ma’aden joint venture entry fee during 2014. The
decline mainly reflects the completion of the construction
of the Ma’aden joint venture mine and refinery, which
became fully operational in December 2014, and the
improved operations of the San Ciprian refinery in Spain,
which includes the effect of the conversion of its energy
source from oil to natural gas.

As a result, free cash flow was $34.8 million higher in 2015
compared to 2014.

The directors declared a fully franked final dividend of
US1.8 cents per share, payable on 23 March 2016 to
shareholders on the register as at 5pm on 3 March 2016.
The fully franked interim dividend for 2015 of 4.5 cents per
share was paid on 28 September 2015.

ALUMINA LIMITED BALANCE SHEET

Cash and equivalents

Investments

Other assets

Total Assets

Payables

Interest bearing liabilities – non-current

Other liabilities

Total Liabilities

Net Assets

Alumina Limited’s net debt as at 31 December 2015 was
$101.2 million. Gearing1 increased to 4.8%, principally due
to the decline in investments in associates, which was
affected by AWAC’s restructuring charges and the loss on
foreign currency balance sheet revaluations that more than
offset the improved operating performance of AWAC.

On 12 November 2014, Alumina Limited issued an
A$125 million 5.5% fixed rate note which matures on
19 November 2019. The proceeds from the note were
swapped into US dollars and used to repay the higher cost
BNDES loan. As a result of this issuance, Alumina Limited
also extended the maturity profile of its borrowings.

In addition to the fixed rate note, Alumina Limited had
$300 million of committed bank facilities. These bank
facilities were extended and re-priced in June 2015. As at
31 December 2015, these facilities expire as follows:

• $150.0 million in December 2017 ($20 million drawn

under these facilities as at 31 December 2015).

• $150.0 million in July 2020 (no amounts drawn under

these facilities as at 31 December 2015).

2015
US$M

9.3

2014
US$M

24.9

2,098.0

2,514.5

3.4

3.8

2,110.7

2,543.2

1.7

110.5

15.6

127.8

1.9

111.5

5.8

119.2

1,982.9

2,424.0

Following the completion of the restructuring of Alumina
Limited’s banking arrangements and the issuance of the
note, the Company achieved significant improvement in its
debt terms, such as borrowing margins, maturity and less
financial undertakings.

1 Calculated as (debt – cash) / (debt + equity).

Debt Maturity Profile as at 31 December 2015 (US$m)

$160

$120

$80

$40

2015

2016

2017

2018

2019

2020

Banks – Drawn

Banks – Undrawn

A$Note

6. MARKET OUTLOOK AND GUIDANCE

MARKET OUTLOOK
Aluminium demand

The world aluminium demand outlook remains positive.
Global aluminium consumption is expected to grow by
around 4% in 2016, compared with growth of 3% in 2015.
Chinese aluminium demand is forecast to grow by 6.5% in
2016, less than in 2015, mainly due to reduced demand in
the construction sector. World demand over the next five
years is expected, however, to grow at around 3%, or half
the rate at which demand grew over the previous five
years.

ALUMINIUM SUPPLY

Global aluminium production growth in 2015 was the
fastest in four years at 8% (China expanding by 12% and
the rest of the world by 2%). This resulted in a surplus of
approximately 1.4 million tonnes of primary aluminium
production in 2015. Global aluminium production costs
reduced by around $240 per tonne over 2015, particularly
due to lower energy costs and currency devaluations.
World primary aluminium inventories have risen and are at
record high levels. These factors have resulted in low
aluminium prices and premiums in 2015. There was a

2 9

supply response in China and the US in the latter part of
2015, although the production cuts were not as deep as
originally announced. While China has been closing high
cost capacity, new capacity which is low on the cost curve
has been added.

World aluminium production growth in 2016 is expected
to be around 1.5 million tonnes in China and around 0.5
million tonnes in the rest of the world.

Pressure from governments in China and the rest of the
world to continue to operate for social and employment
reasons is expected to remain a risk to pricing. However,
there is the prospect of further smelter closures in the US
and elsewhere if low prices persist over 2016 (around 2
million tonnes of smelting production outside China
continues to lose money on a cash cost basis).

ALUMINA DEMAND

The world total annual alumina demand growth in 2016 is
expected to be over 3% in 2016. This is likely to fluctuate
with the extent smelting curtailments are increased,
sustained or reversed.

ALUMINA SUPPLY

There was an excess of alumina production compared
with demand outside China in 2015. In addition there was
a significant drop in the alumina cash cost curve. Together
with the lower aluminium price and margins, Chinese
and Australian alumina prices fell, in the case of Australian
alumina, from $355 to $201 per tonne over the course
of 2015.

Towards the end of 2015 and extending into 2016, this
sustained low alumina price led to significant alumina
production curtailments inside and outside China.
AWAC announced the full curtailments of its refineries in
Suriname (completed in 2015) and Point Comfort (to be
completed in the first half of 2016). While these refineries
were already partly curtailed, this will result in the
curtailment of a total of 4.5 million tonnes of capacity.
Some 1 million tonnes of capacity was also curtailed at
the Lanjigarh refinery in India. Non-AWAC refineries in
the US are also considering further curtailments.

In China, where the cost of production is on average much
higher than AWAC’s, there has been a significant
curtailment response to low prices. It has been estimated
that at January 2016 prices, on a provincial average basis,
all Chinese refineries were cash negative. Seven million
tonnes of Chinese alumina capacity have been curtailed.
Also, planned additional capacity has been slowed. As a
result, it is expected that the supply/demand surplus will
tighten considerably over 2016. These factors have led to
a modest price recovery in early 2016.

Supply and demand for alumina is expected to be nearly
balanced in 2016 (or potentially in deficit, if all of the
announced refining curtailments occur and hold during
2016). Whilst these curtailments provide cautious optimism

for a modest alumina price recovery over the course
of 2016, there are downside risks as a significant volume
of aluminium production remains challenged at current
prices.

The significant gap between current alumina prices and an
incentive price to build a new refinery means that there are
very few refineries outside China likely to be built for a
number of years at least. Beyond the ramping-up of the
AWAC refinery in Saudi Arabia and the 1 million tonne
Hongqiao Well Harvest Winning refinery project in
Indonesia, both due to be completed this year, there are no
refinery projects fully committed outside China. The next
most likely refinery to be completed outside China in the
next four years may be the Emirates Global Aluminium
greenfields refinery in the United Arab Emirates, due for
completion in 2018. Development of refinery projects in
India seems to have stalled.

BAUXITE

Total imports of bauxite into China in 2015 was around
56 million tonnes. Malaysia became the biggest exporter
of bauxite to China in 2015, shipping around 24 million
tonnes. This bauxite was supplied at low cost, which
impacted the pricing of other third party bauxite. Bauxite
prices were around $52 per tonne at the end of 2015
(delivered to China, adjusted on a value-in-use basis)
and have since dropped further to around $47 per tonne.

The Malaysian Government introduced a three month ban
on bauxite mining from 15 January 2016 due to growing
environmental concerns. The Government has also
announced that no new bauxite export licences will be
issued. Whether this is a temporary or a longer term supply
disruption, it is not expected to cause alumina or
aluminium production shortfalls, as there are significant
bauxite stockpiles in China and bauxite imports into China
could be increased from other sources but at a higher
cost. Chinese bauxite customers have commenced
importing more bauxite from Guinea – at a higher cost
than Malaysia.

Indian and Australian exports of bauxite could increase but
would also be at a higher cost than from Malaysia.

AWAC’s bauxite production costs are expected to remain
relatively stable compared with the imported bauxite costs
of Chinese merchant refiners. Whilst a devaluation of the
yuan would reduce the Chinese denominated costs of
production in US dollar terms, it would increase the cost of
bauxite imports, which are priced in US dollars. Over the
longer term, the share of Chinese alumina production
based on imported bauxite is expected to increase from
approximately one-third today to approximately 60% by
2030, due to the expected worsening quality and higher
mining and processing costs of Chinese domestic bauxite.
Whilst current large bauxite stocks provide a buffer for
most Chinese bauxite-importing refineries in 2016, it is
expected that by 2019, new and large greenfields mines
outside China will be required to feed the Chinese needs.

3 0

AWAC GUIDANCE

The following 2016 guidance is provided to assist the
understanding of the sensitivity of AWAC results to key
external factors. The guidance cannot be expected to be
predictive of exact results; rather it provides direction and
approximate quantum of the impact on profit before tax of
movements around a given base figure. Actual results will

vary from those computed using the guidance. Guidance is
not linear, hence significant movement away from the base
rates used may result in different sensitivities. Sensitivity of
each element of the guidance has been considered in
isolation and no correlation with movements in other
elements within the guidance has been made.

ITEM

2016 GUIDANCE

Production – alumina

Approximately 12.7 million tonnes

Production – aluminium

Approximately 164,000 tonnes

Australian $ Sensitivity:
+1¢ in USD/AUD

Brazilian $ Sensitivity:
+1¢ in BRL/USD

Approximately – $26.0 million profit before tax

Approximately – $1.70/t alumina EBITDA

Minimal impact

Third party smelter grade alumina shipments expected
to be based on alumina price indices or spot

Approximately 85% for the year

AWAC sustaining capital expenditure

Approximately $150 million

AWAC growth capital expenditure

Approximately $25 million

AWAC Point Comfort after tax restructuring
• Charges (IFRS)
• Cash Flows

AWAC Suralco after tax restructuring
• Charges (IFRS)
• Cash Flows

Approximately $31 million
Approximately $31 million

Approximately $13 million
Approximately $13 million

AWAC Point Henry and Anglesea after tax restructuring
• Charges (IFRS)
• Cash Flows

Approximately $2 million
Approximately $15 million

ALUMINA LIMITED GUIDANCE

The financial results of Alumina Limited are dependent
upon AWAC’s operational performance and profitability,
and the ability of Alumina Limited to influence the
performance of AWAC to ensure that the Company’s
interests are protected. Alumina Limited’s objectives are to
achieve the position where AWAC is sustainable in the long
term, that it has adequate governance procedures in place,
and that long term capital allocation is implemented to
maximise AWAC’s returns.

Alumina Limited’s expectations for cash receipts from
AWAC in 2016 are that total receipts by Alumina Limited
should exceed its corporate needs.

In 2016, Alumina Limited anticipates there could be equity
calls by AWAC entities in relation to working capital
support. However, this is subject to market conditions.

Letter by Chair of
Compensation Committee

3 2

Letter by Chair of

Compensation Committee

Dear Shareholder,

I am pleased to present Alumina Limited’s 2015 remuneration report.

2015 COMPENSATION COMMITTEE AREAS
OF FOCUS

In 2015, the Committee decided to add two specific focus
areas to its annual work plan:

• To review the use of financial, strategic and commercial
measures in the company’s STI scorecard, and in the
context of the AWAC joint venture, to challenge our
thinking on the meaning of stretch performance and the
tools used by the board to attribute value to outcomes
achieved by executives. The Committee is satisfied that
the scorecard and mechanisms in place to assess
performance and determine STI awards continue to
be robust and appropriate to Alumina Limited.

• To review the relevance of the two comparator groups
in the company’s LTI scheme, particularly with regard
to the ownership base of Alumina Limited. This work
validated the use of two groups, and was able to
recommend some changes to the international group.

In closing I would like to thank shareholders who have
been generous with their time and provided feedback on
our remuneration policies, structures and report. I would
also like to thank our shareholders for their support of last
year’s report.

EMMA STEIN
Chair

2015 REMUNERATION OUTCOMES AND DECISIONS

At the start of the year, the Compensation Committee
established a Short Term (STI) performance scorecard
which encapsulated the key business challenges for the
executive team. As trading conditions deteriorated
through the year the outcomes achieved on financial
measures were of particular value to shareholders.
While the joint venture agreement sets out a formula for
minimum dividends from AWAC, management were
able to negotiate a much better outcome for Alumina
Limited’s shareholders such that in 2015, dividends of
US6.3 cents per share were declared. For longer term
value, securing competitive gas supply to underpin our
Western Australian operations was notable. A number of
joint venture matters were also resolved.

Overall the Compensation Committee rated the STI
scorecard performance at 90 per cent of target.

As previously communicated, our CEO’s remuneration
was re-structured in 2014 to achieve greater shareholder
alignment and now consists of a higher base remuneration
with equity exposure and lower STI and LTI opportunities.
Overall, the package is reflective of the unique nature of
Alumina Limited and the chief executive’s role, and is
modest when compared with peers.

Other remuneration decisions taken in 2015 for the year
ahead include no remuneration increase for executives
(to reflect the harsher trading reality), and maintaining
director fees at the level set in 2011.

In 2015, partial vesting of the 2012 and 2013 Performance
Rights resulted in an award of 49 per cent of the total
opportunity of Performance Rights to the executive team,
excluding the CEO.

While demand continues to grow for alumina, the industry
has remained in a state of over-supply. As a result,
Alumina Limited and Alcoa have acted to improve AWAC’s
relative cost, taking hard decisions to curtail, close or
divest operations and thereby boosting the quality of the
AWAC asset portfolio. It was therefore pleasing to see
investors in Alumina outperforming the total shareholder
returns of industry peer companies.

3 3

Remuneration
Report

3 4

Remuneration

Report

This Remuneration Report outlines the Director and executive remuneration
arrangements of Alumina Limited. The information provided is given in accordance
with the requirements of the Corporations Act and has been audited. This report
forms part of the Directors’ Report for the year ended 31 December 2015.

All contracts for key management personnel (KMP) are denominated in Australian
dollars and accordingly all figures in the Remuneration Report are in Australian
dollars unless otherwise shown. References to Senior Executives excludes the
Chief Executive Officer (CEO).

CONTENTS

The Remuneration Report is presented in the following sections:

1 REMUNERATION POLICY & FRAMEWORK

Persons covered by this report

1.1
1.2 Remuneration framework
1.2.1 Remuneration in business context
1.2.2 Remuneration Components
1.2.3 CEO and Senior Executives remuneration mix and comparables

2 COMPANY PERFORMANCE & EXECUTIVE REMUNERATION OUTCOMES

Remuneration decisions and outcomes for 2015

2.1
2.1.2 Remuneration governance and process
2.1.3 Other remuneration matters
2.2 Senior Executive remuneration
2.2.1 STI Scorecard
2.2.2 Performance under the STI Plan
2.2.3 LTI Plan Performance testing
2.3
2.3.1 Executives’ Service Agreements

Executive KMP remuneration and equity granted in 2015

3 NON-EXECUTIVE DIRECTORS REMUNERATION

3.1 Remuneration Outcomes
3.2 Non–Executive Director share holdings

36
36
36
38
39

42
43
45
46
51
52
54
55
60

61
62

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1. REMUNERATION POLICY & FRAMEWORK

1.1 PERSONS COVERED BY THIS REPORT

This report covers remuneration arrangements and outcomes for the following key management personnel
of Alumina Limited:

NAME

ROLE

Non-Executive Directors

John Pizzey

Emma Stein

Chen Zeng

Peter Day

Mike Ferraro

Executive Director

Peter Wasow

Other KMP

Chris Thiris

Stephen Foster

Andrew Wood

Non-Executive Chairman

Non-Executive Director

Appointed Chairman 1 December 2011
(director 8 June 2007)

Appointed 3 February 2011

Appointed 15 March 2013

Appointed 1 January 2014

Appointed 5 February 2014

Chief Executive Officer (CEO)

Appointed CEO 1 January 2014

Chief Financial Officer (CFO)

Appointed 13 December 2011

General Counsel/Company Secretary

Appointed 4 December 2002

Group Executive Strategy & Development

Employed 1 September 2008

1.2 REMUNERATION FRAMEWORK

1.2.1 REMUNERATION IN BUSINESS CONTEXT

Alumina Limited’s remuneration strategy and policy has
been developed in recognition of the unique nature of the
Company, the complexities of managing a significant but
non-controlling interest in a global joint venture and the
significance of external factors influence on the sector
and the Company’s performance.

Alumina Limited owns a 40 per cent interest in the multi-
billion dollar world-wide enterprise, AWAC, the world’s
largest bauxite and alumina producer. Alcoa Inc. owns the
remaining 60 per cent and additionally, is responsible for
AWAC’s operational management. Alumina Limited is
invested solely in the AWAC joint venture however for
Alcoa, the AWAC assets form part of their upstream
business at a time when Alcoa has increasingly focused on
developing its downstream manufacturing businesses.
As a result the partners can have differing priorities and
objectives for AWAC. Alumina Limited’s executives are

responsible for protecting and advancing the interests of
its 59,000 shareholders in the management of the AWAC
portfolio of assets. AWAC is a large capital-intensive
business operating in a number of jurisdictions, some in
remote locations.

The Board has specifically charged the CEO and senior
executives with maintaining Alumina Limited’s investment
grade rating, continued overhead discipline (particularly
important in 2015 as difficult trading conditions emerged)
and supporting the joint venture in its efforts to improve its
relative cost position and strategic options. With only four
key executive officers, Alumina Limited requires high
calibre people with strong skills sets and commercial
experience to ensure the Company and its investment are
managed well. The Company and its investment are also
subject to rigorous governance regimes and financial and
reporting controls.

3 6

REMUNERATION IN BUSINESS CONTEXT – ALUMINA LIMITED’S EXECUTIVES ARE CHARGED WITH
DELIVERING ON ALUMINA’S BUSINESS STRATEGY

Shaping AWAC’s
strategy, competitive
position and options

Maintaining Alumina
Limited’s Investment
Grade Balance Sheet
and Metrics in a
Highly Cyclical
Environment

Managing Alumina
Limited’s investment
as a tier one largely
pure play global
bauxite and alumina
producer

Alumina Limited’s
cash flow optimisation
– above minimum joint
venture dividends and
year on year overhead
discipline

To deliver on Alumina Limited’s business strategy,
the remuneration strategy has been designed to:

The remuneration strategy is delivered via the
following remuneration components:

Attract the right people, offer competitive
performance-based remuneration

• Attract executives who are highly commercial,

strategic and have tactical experience.

• Remuneration needs to be competitive in a

market context.

Fixed remuneration

• Set to attract, retain and motivate the right talent to

deliver on the Group’s strategy. The Board takes in to
account individual performance, skills, expertise and
experience as well as external benchmarking to
determine executive’s fixed remuneration.

‘At risk’ remuneration
(Short Term and Long Term Incentives)

• The ‘at risk’ components are based on performance

against key financial, commercial and strategic
measures that are linked to generating satisfactory
returns for shareholders.

• Awarding of the STI component is also dependent on
achievement of certain financial “gateway” measures.

• The LTI component involves two performance

measures, one domestic and the other international.
More detail on the ‘at risk’ remuneration components
and their link to company performance is included in
section 2 of this report.

Reward results delivered by executives

• The remuneration framework gives greater

prominence to strategic, corporate and commercial
initiatives so that the impact of short-term financial
metrics are appropriately weighted.

• When compared with peers, executives are rewarded

lower levels of maximum short term incentives
reflecting the Board’s intention that executive
reward should not peak merely because
commodities are at the ‘top of cycle’.

Align company, executive and board and
stakeholder interests through share ownership

• The remuneration structure has been designed so
that the FAR and LTI components of the CEO’s
remuneration are impacted by the Company’s
share price.

• Alumina Limited has a minimum shareholding policy

for Non-executive directors.

• Different mechanisms across all the remuneration
components (FAR, STI and LTI) expose executives
to the Company’s share price, facilitate executives
in building meaningful equity positions, and some
rewards are deferred so that executives are
encouraged to be committed for a meaningful
period of time

1.2.2 REMUNERATION COMPONENTS

The following table sets out the different components of the CEO and Senior Executive remuneration, the performance
measures used to determine the amount of remuneration executives will receive and how the performance measures
drive achievement of Alumina Limited’s strategic objectives.

TABLE 1
Components of Executive Remuneration

COMPONENT

PERFORMANCE MEASURE

STRATEGIC OBJECTIVE

Fixed
Remuneration
(delivered through
cash and equity for
the CEO and
through cash for
other executives)

Considerations:

• Individual’s role and responsibilities

• Depth of knowledge and skill set

• Level of expertise and effectiveness

• Market (benchmarking)

Short Term
Incentive (STI)
(delivered through
cash for the CEO
and Mr Wood
and a mix of cash
and equity for the
CFO and General
Counsel)

Corporate Scorecard (50% of STI Award)

Minimum Performance Threshold

To trigger payment under the Corporate
Scorecard, a minimum threshold of
performance is required being:

• The achievement of a profit after significant

items; or

• The payment of a dividend to shareholders

Secure, retain and motivate a highly skilled and
experienced executive team.

This reinforces discipline in financial
management and goal setting also providing
determinable outcomes that are linked to the
Company’s performance.

Financial objectives based on controllable
metrics:

• Free Cash flow

• Investment rating

• Cash flow from AWAC is fundamental to

Alumina Limited’s capacity to pay dividends
and to meet the terms of external financing.

• A sound balance sheet with key banking
relationships is critical to the Company’s
strength, stability and future success.

Strategic and individual objectives

• Aligned to strategic and growth objectives.

• Improve long-term cost curve positioning and

strategic options to develop the business.

• Protect Alumina Limited’s interests through
increased clarity on AWAC governance.

• Ensuring Alcoa treats AWAC transactions at

arm’s length and Alumina Limited’s
shareholders’ interests are protected in short
and long term.

Personal Scorecard (50% of STI Award)

• Improve internal operating efficiency and

Implementation of business initiatives for which
individual executives have defined
accountabilities.

profitability.

Long-term
Incentive
Plan (LTI)
(delivered
as equity)

Three year Company TSR performance equal to
or outperforming 50 per cent in either of the two
comparator groups results.

• A result below 50 per cent will not result in an
award of equity to the Company participants.

• Emphasises the importance that management
strive to maintain the share price through the
volatility involved in a capital intensive
business heavily impacted by external factors.

• Linked to long-term business strategy and
focuses executives on key performance
drivers for sustainable growth.

• Links rewards of participants of the Plan to

the experience of the shareholders.

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1.2.3 CEO AND SENIOR EXECUTIVES REMUNERATION MIX AND COMPARABLES
Remuneration Mix Overview

The Chief Executive Officer, other senior executives and professional employees all share the same remuneration
principles. However, there are differences in the structures and relativities.

In setting the CEO and executive remuneration quantum and mix, the Board takes into account a number of factors
including:

• The scope of the individual’s role

• Their skills and experience

• Role-critical factors

• Company performance

• External market practice.

CEO 2015 Total Opportunity Remuneration Mix

53%

19%

53%

Fixed annual remuneration (FAR)

FAR Conditional rights (equity)

Fixed annual remuneration (FAR)

FAR Conditional rights (equity)

19%

STI maximum
(cash)
STI maximum
(cash)

19%

LTI at face
value (equity)
LTI at face
value (equity)

Senior Executives1 2015 Total Opportunity Remuneration Mix

48%

Fixed annual remuneration (FAR)

33%

STI maximum
(50% cash – 50% equity)
STI maximum
(50% cash – 50% equity)

19%

LTI at face
value (equity)
LTI at face
value (equity)

1 Mr Wood’s remuneration mix differs from the other senior executives. His maximum potential award is FAR 55%, STI 28% and LTI 17%. Mr Wood’s STI
is received in cash only.

3 9

CEO at target remuneration (A$ million)

2013

2014

2015

0.5

1.5

2.5

FAR

FAR Equity

STI

LTI

SENIOR EXECUTIVE1

The senior executives fixed remuneration represents
51 per cent of their total at target remuneration (TTR).
Although the senior executives are eligible to receive
approximately 50 per cent of their STI award in cash, they
are required under the terms of the STI Plan to apply 50
per cent of their after tax STI award in purchasing Alumina
shares that must be held for three years. In total, senior
executives would hold approximately 35 per cent of their
at target remuneration on a deferred basis.

1 Mr Wood is employed under a different remuneration arrangement to
the other senior executives. Mr Wood receives 100 per cent of any STI
award in cash and is not required to apply any to purchase shares in
Alumina Limited.

CEO

While the CEO’s remuneration has a higher weighting to
fixed remuneration, this is reflective of the fact that his STI
and LTI opportunity have been substantially reduced when
compared with that of his predecessor. As demonstrated
by the adjacent chart, the CEO’s 2015 ‘at target’
repositioned remuneration package is significantly different
to the ‘at target’ profile of the previous CEO. Further, the
CEO’s fixed remuneration, and total target remuneration, is
modest relative to his peers. The reweighting of the CEO’s
package aligns with Alumina Limited’s remuneration
strategy, in particular to have lower levels of maximum
short term incentives when compared with peers,
reflecting the Board’s intention that executive reward
should not peak merely because commodities are at
the ‘top of cycle’.

Also, as part of the renegotiation in 2013, the CEO’s fixed
remuneration includes an annual share right component.
The share rights are conditional on a minimum of 18
months service and if satisfied, is followed by a further
18 month deferral period (three years in total) from the
date of the grant and are subject to share price fluctuations
and therefore the final value reflects the experience of
shareholders over the deferral period.

In 2015, the grant value of the share right component was
$207,000. Including the LTI component of 19 per cent,
the CEO has approximately 30 percent of his ‘at target’
remuneration allocated as equity. This reinforces the
remuneration policy that the CEO acts in the longer term
interests of the Company and its shareholders. The CEO’s
fixed remuneration remains unchanged for 2016.

The Board is satisfied that, while the CEO’s total target
remuneration is modest relative to his peers, it is
appropriate in the context of Alumina Limited being a
non-operating partner of the AWAC joint venture but also
recognising the bauxite, alumina and aluminium industry
is global, complex and dynamic.

4 0

2. COMPANY PERFORMANCE & EXECUTIVE REMUNERATION OUTCOMES

In the first half of 2015 the AWAC business achieved solid
returns due to the then index or spot price for alumina, the
strategy to curtail or sell higher cost alumina refineries,
lower energy costs and a strengthening US dollar. The
latter half of 2015 was dominated by a declining alumina
price and poor market fundamentals. In the fourth quarter
of 2015, the alumina price fell 24 per cent (and 48 per cent
over the entire year). The price fall had a corresponding
negative impact on second half earnings. Also, a negative
impact on the full year profit for 2015 resulted from charges
associated with the strategy of repositioning AWAC’s asset

portfolio. Alumina Limited equity accounted charges of
US$169.9 million were incurred due to the curtailment of
the Suralco and Point Comfort alumina refineries and the
closure of the Anglesea power station.

Despite the downturn in the second half of the year, AWAC
distributed US$106 million in dividends, distributions and
capital returns and Alumina Limited’s full year net profit
was US$88.3 million (up 190% from the previous year) as
reported, or US$258.2 million, excluding significant items.
Earnings per share were US3.1 cents in 2015 (negative
US3.5 cents in 2014).

The diagrams that follow highlight Alumina Limited’s performance against market indicators.

Net (Loss)/Profit After Tax (US$ million)

Net (Loss)/Profit After Tax ($million)

Dividends declared per share (US cents per share)

Dividends declared per share
(US cents per share)

200
150
100
50
0
–50
–100
–150

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

Market Capitalisation (US$ million)

Market Capitalisation ($ million)

Percentage change in share price

100%

50%

–50%

–100%

6,000

4,000

2,000

2011

2012

2013

2014

2015

Net debt (US$ million)

Net debt ($ million)

800

600

400

200

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

REMUNERATION INDICATORS

Per cent increase in fixed remuneration1

Per cent short-term incentive2

Per cent long-term incentive2

2015

3.50%

42%

24%

2014

3.00%

40%

10%

2013

3.80%

22%

2012

3.00%

41%

Nil

2011

6.00%

38%

Nil

1 Percentage is calculated by reference to FAR as at 31 December 2015.

2 Represents the average applicable to senior executives and CEO

2.1 REMUNERATION DECISIONS AND OUTCOMES FOR 2015

FIXED REMUNERATION

2015 outcomes

As disclosed in last year’s report, following a review of external data points and in the context
of the Company’s 2014 performance, the CEO and senior executives received an increase of
3.5 per cent to their fixed remuneration effective 1 January 2015. The CEO’s Performance
Rights and STI levels are expressed in dollar terms, and the Compensation Committee
recommended that the 3.5 per cent increase should be applied to these dollar amounts. The
fixed remuneration for the CEO and senior executives did not increase for 2016.

SHORT TERM INCENTIVE

2015 outcomes

Corporate Scorecard

In 2015, the Board is pleased to report that, consistent with Alumina Limited’s sound financial
performance, financial targets were exceeded and the highest dividend since 2008 was paid
to shareholders triggering payment under the corporate element of the scorecard.

For a detailed summary of performance against the Corporate Scorecard see page 52.

Personal Scorecard

In 2015, in aggregate, executives performed well against the Personal Scorecard.
The Compensation Committee recommended individual executive performance ratings
and STI payments based on:

• assessment of Balanced scorecard outcomes

• appropriateness in the context of shareholder returns

• consideration of other factors (e.g. highly valuable outcomes which were not on the

Personal Scorecard.)

For a detailed performance against the Personal Scorecard see page 53

In total, in 2015, Alumina Limited’s STI scheme paid $1,126,000 to its KMPs, which was an
increase of $116,000 on 2014’s level.

Net Profit/(Loss) after tax excluding significant items

The reported full year net profit after tax of US$88.3 million was the highest profit before
significant items since 2011.

In 2015, in line with the policy outlined in the 2014 Remuneration Report, when calculating
STI outcomes the Board determined to exclude costs associated with the curtailment of
the Suralco and Point Comfort alumina refineries and charges relating to the closure of the
Anglesea power station on the basis that these decisions were consistent with the strategy
to reposition AWAC’s asset portfolio, and in the best long-term interest of shareholders.

Further information outlining the Board’s decision to exclude these items are outlined
on page 53.

4 2

LONG TERM INCENTIVE

2015 outcomes

In 2015, the 2013 LTI grant was tested, and the 2012 LTI grant was retested for the second
(and final) time. (Note: retesting of LTI grants was abolished from 2014). Both tranches failed to
meet the minimum vesting criteria against the ASX Comparator Group. However, partial
vesting occurred for both tranches matched to the International Comparator Group.

In line with Alumina’s performance when compared with the comparator group, approximately
45 per cent of Performance Rights granted in 2012 and 49 per cent of 2013 Performance
Rights vested to eligible participants.

For further information on outcomes under the LTI see page 54.

International Comparator Group

In 2015, the International Comparator Group consisted of the following companies in the
alumina and aluminium industry:

• Alcoa Inc.

• United Company Rusal

• Noranda Aluminium Holdings

• Century Aluminium

• Aluminium Corporation of China

• Norsk Hydro

• Hindalco Industries

Shandong Nanshan was omitted from the testing due to it ceasing to trade.

The Compensation Committee undertook a rigorous review of the International Comparator
Group in 2015 with a view to expanding the size of the group. While there was a change in the
composition of the comparator group, due to the limited number of relevant companies
against which to test on a like basis Alumina Limited’s performance, the international
comparator group continues to comprise eight companies. Further information can be found
on page 54.

Equity Positions

As a result of the 2015 remuneration decisions and policy operation, all senior executives and the CEO continued to
increase their equity holdings and exposures. Their equity positions are summarised in Tables on page 58 and 59.

2.1.2 REMUNERATION GOVERNANCE AND PROCESS

The ultimate responsibility for the Company’s executive remuneration structure and outcomes rests with the Board of
Directors.

The Board has delegated to the Compensation Committee the task of reviewing remuneration trends and developments
and to propose remuneration strategies, policies and recommendations for the Board to consider.

The diagram on page 44 represents Alumina Limited’s remuneration governance framework.

4 3

Remuneration Consultants

The Compensation Committee has the authority to seek
advice from independent remuneration consultants on
matters relating to remuneration including developing and
implementing executive remuneration strategies,
associated statutory obligations and the quantum of
remuneration.

Alumina Limited has established protocols for the
engagement of remuneration consultants and the
processes to be followed regarding recommendations.
Relevant executives are trained on an annual basis to
ensure they understand the procedures.

In seeking remuneration advice from consultants, the
Compensation Committee ensures that the advice is
free from undue influence by:

• selecting the consultant

• briefing the consultant

• receiving the report directly from the consultant rather

than via Company executives

• the consultant declaring that a remuneration

recommendation is free from undue influence by
the Key Management Personnel to whom it relates.

In 2015, no remuneration recommendation, as defined
in the Corporations Act, was received.

ALUMINA LIMITED’S REMUNERATION GOVERNANCE FRAMEWORK

THE BOARD OF DIRECTORS

Reviews and approves the Charter of the Compensation Committee. The Board approves the remuneration
philosophy, policies and practices.

COMPENSATION COMMITTEE

Delegated authority to:

• Take advice from management and where relevant,

independent advisers.

• Devise a remuneration framework, strategy, policies

and practices.

• Oversee the implementation of the remuneration

strategy and policy.

• Establish appropriate performance objectives and

measures.

• Monitor performance against objectives and

recommend incentive awards.

• Approves remuneration outcomes.

EXTERNAL CONSULTANTS

• Provide independent advice on remuneration trends

and practices.

• Provide benchmarking data and analysis.

• Support the Compensation Committee in relation to

changes to remuneration policy, employment
contracts, structures and practices etc.

• Provide governance and legal advice on

remuneration related matters.

MANAGEMENT

• Provides the Compensation Committee with information to assist in its remuneration decisions including

remuneration recommendations.

The Compensation Committee is solely formed of Non-Executive Directors and is chaired by Ms Emma Stein.

The duties and responsibilities delegated to the Compensation Committee by the Board are set out in the Compensation
Committee’s Charter, which is available on the Company’s website at www.aluminalimited.com/compensation-
committee.

4 4

2.1.3 OTHER REMUNERATION MATTERS

Superannuation

Share Trading and Hedging Prohibitions

Performance Rights granted under Alumina Limited’s LTI
provisions must remain at risk until fully vested. This is
consistent with Alumina Limited’s Share Trading Policy that
prohibits Directors and employees from engaging in:

• short-term trading of any Alumina Limited securities

• buying or selling Alumina Limited securities if they

possess unpublished, price-sensitive information or

• trading in derivative products over the Company’s

securities, or entering into transactions in products that
limit the economic risk of their security holdings in the
Company.

OPTION PLANS

Alumina Limited does not have any option plans available
to Non-Executive Directors, executives and senior
managers (including Executive Directors) other than
Performance Rights granted to the CEO and senior
executives under the Employee Share Plan (ESP).

All Alumina Limited employees are members of a fund
of their choice. Contributions are funded at the
Superannuation Guarantee Contributions (SGC) rate,
currently 9.5 per cent of an employee’s fixed annual
remuneration. Alumina Limited contributes 9.5 per cent
of employees’ salary up to the maximum superannuation
contributions base, which is linked to each individual’s
earnings. The maximum contributions base is an annual
income of approximately $203,240 (2015–2016).

Clawback Policy

In 2014 the Board adopted a Clawback Policy that provides
scope for the Board to recoup incentive remuneration paid
to the CEO and senior executives where:

• material misrepresentation or material restatement of
Alumina Limited’s financial statements occurred as a
result of fraud or misconduct by the CEO or any senior
executives; and

• the CEO or senior executives received incentive

remuneration in excess of that which should have been
received if the Alumina Limited financial statements had
been correctly reported.

To the extent permitted by law, the Board will seek to
recoup incentive remuneration, in all appropriate cases,
paid (or in the case of equity-based compensation, which
vested) to the CEO or any senior executives on or after the
effective date of the clawback Policy if and to the extent
that, in the case of equity awards that vested based on the
achievement of financial results that were subsequently
reduced due to a restatement, the Board also may seek to
recover gains from the sale or disposition of vested shares.
In addition, the Board may to the extent it considers
appropriate, determine to cancel unvested equity awards
in circumstances where the Board or the Compensation
Committee took into account the financial performance of
the Company at the time of granting such awards and
where the financial results were subsequently reduced due
to a restatement.

4 5

2.2 SENIOR EXECUTIVE REMUNERATION

This section outlines how the STI and LTI ‘at risk’ components of executive remuneration operate and the outcomes
against these plans.

2015

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Description and
Performance
Period

• The Board sets financial and non-financial
performance objectives at the start of each
year, and company and executive
performance is then assessed against each
objective at the end of each year to determine
whether executives receive payment under
the STI plan.

• The STI is delivered in cash for the CEO and
Mr Wood, and cash and equity for all other
executives.

The LTI is delivered in the form of Performance
Rights that are tested over a three year
performance period (in the case of Performance
Rights issued prior to 2014, the Performance
Rights are also subject to two further tests at
six months and 12 months after the initial test
(refer below)). Each Performance Right results
in delivery to the holder of an ordinary share in
Alumina Limited upon vesting (for Performance
Rights granted prior to 2016) or upon vesting
and exercise (for Performance Rights granted
from 2016).

STI
component value

• The CEO had the opportunity to earn 30 per
cent of FAR with a maximum benefit of up to
$414,000 in 2015 (with the discretion to be
adjusted annually).

• For Mr Thiris and Mr Foster the maximum is
70 per cent of FAR and 50 per cent for Mr
Wood.

• The CEO’s Performance Right entitlement
is limited to a maximum benefit of up to
$414,000 in 2015 (with the discretion to be
adjusted annually) equivalent in Alumina
Limited shares (valued at grant date
approximately 30 per cent of FAR).

• For Mr Thiris and Mr Foster the maximum
is 40 per cent of FAR and 30 per cent for
Mr Wood.

The annual dollar LTI grant is divided by the
average Company share price over the 20
trading days leading up to the time that the
Board determined to make offers of
Performance Rights to senior executives
under the ESP for the relevant year, in order
to determine the number of Performance
Rights to be offered.

4 6

2015

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Performance
hurdles

• Prior to the commencement of each year, the
Board establishes a scorecard comprising
of corporate (50 per cent) and personal
(50 per cent) objectives focused on key
financial outcomes for the year ahead
together with critical initiatives, issues and
projects (which could be at the asset, joint
venture or industry level). The required
performance against each objective is set
against a specific quantifiable metric or a
specific minimum milestone (e.g. agreement
to the initiative by the joint venture and
delivery of a detailed assessment of options).

• The Board is responsible for approving the

scorecard. Through the year, as part of a suite
of reporting, the CEO presents updates on
progress against the scorecard. Details of the
Corporate and Personal scorecards are set
out on page 52 and 53.

• Alumina Limited’s performance is tested
using relative TSR compared against two
Comparator Groups. Relative TSR was
chosen as a performance measure as an
appropriate means of measuring Company
performance as it incorporates both capital
growth and dividends. The two comparator
groups against which Alumina’s performance
is tested are:

(Test 1 – ASX Comparator Group) S&P ASX
100 Index companies excluding the Company,
the top 20 companies by market capitalisation
and property trusts. This test is applied to
50 per cent of the award. The ASX
Comparator Group was developed in order
to measure Alumina Limited’s performance
with reference to companies which are
alternative investments (in the Australian
context) for the Company’s shareholders; and

(Test 2 – International Comparator Group)
eight selected companies in the alumina and/
or aluminium industries that are listed in
Australia or overseas, excluding the
Company. This test is applied to 50 per cent
of the award. The International Comparator
Group comprises companies that reflect
Alumina Limited’s direct competitors in the
market and operate in the alumina and/or
aluminium industries.

The Compensation Committee reviewed the
constituents of the International Comparator
Group in 2015, for a discussion of this refer
to page 54.

2015

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Performance
assessment

• Performance hurdles are independently

measured by Mercer Consulting (Australia) at
the conclusion of the relevant performance
period. Alumina Limited’s TSR is ranked
against the TSR of companies in each of the
comparator groups.

• If Alumina Limited’s TSR is:

» less than the TSR of the company at the

50th percentile of the relevant comparator
group, ranked by TSR performance —0 per
cent of the Performance Rights in each
relevant tranche will vest.

» equal to the TSR of the company at the 50th
percentile of the relevant comparator group,
ranked by TSR performance* — 50 per cent
of the Performance Rights in each relevant
tranche will vest.

» equal to or greater than the TSR of the
company at the 75th percentile of the
comparator group, ranked by TSR
performance** — 100 per cent of the
Performance Rights in each relevant
tranche will vest.

* If Alumina Limited’s TSR performance is between that of

the entities (or securities) at the median (i.e. the 50th
percentile) and the 75th percentile of the ASX
Comparator Group ranked by TSR performance, the
number of Performance Rights in the relevant tranche
that vests will increase from 50% by two percentage
points for each percentage point by which the
Company’s percentile ranking is higher than the 50th
percentile.

** If the company’s TSR performance is equal to that of any
entities (or securities) between the 50th percentile and
the 75th percentile of the international comparator group
ranked by TSR performance, the number of performance
rights in the relevant tranche that vests will be equal to
the vesting percentage assigned by the board to that
company. If the company’s TSR performance is between
that of any two such entities (or securities) in the
international comparator group, the number of
performance rights in the relevant tranche that vests
will be determined on a pro-rata basis relative to the
vesting percentages assigned by the board to those
entities (or securities).

At the end of the year, for each individual, the
Compensation Committee reviews performance
against the scorecard. In making its
assessment, the Committee considers actual
performance results as well as internal and
external factors that may have contributed to
the results. The Compensation Committee
receives a report from the CEO detailing:

• financial targets, actual performance and

underlying assumptions.

• key activities underpinning each non-financial

objective.

• actual performance outcomes.

• management commentary around key factors

and management decisions leading to
performance outcomes.

• individual performance objectives and

indicative performance.

In determining its recommendations to the
board on the level of STI payments, the
Compensation Committee decides and,
through discussion, tests:

• what weighting to apply to the individual
scorecard components, weighting more
highly those that had the potential to
significantly impact shareholder value.

• whether each individual element was

achieved, in which case this is likely to result
in a “target” rating for that element.

• if an element was achieved and surpassed,
whether it was sufficiently demanding or
created sufficient additional value to warrant
an above target rating and if so, by how
much.

• if an element was not achieved, whether and
for what reason a positive rating is given,
otherwise likely to be zero.

Given the nature of the building blocks to the
Alumina Limited STI scheme, a simple
distinction between threshold, at target and
stretch performance is not always apparent,
especially at the beginning of the year. But in
making its assessments as described above,
the Compensation Committee is focused on a
scheme which is sufficiently demanding and
rewards hard-won achievements by executives.

4 8

2015

Retesting

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

• Retesting applies to Performance Rights

issued prior to 2014. If less than 100 per cent
of Performance Rights vest when initially
tested at the end of the three year
performance period, two further retests apply,
six months and 12 months after the initial test.
Any Performance Rights that do not vest after
the second retest will lapse.

• The Compensation Committee abolished

retesting in respect of Performance Rights
issued from 2014 onwards, following a review
in 2013.

4 9

2015

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

• There is no entitlement to dividends, bonus
issues or other benefits payable until the
relevant performance conditions applicable to
Performance Rights are satisfied (or waived)
and the Performance Rights vest (and, in the
case Performance Rights granted from 2016,
are exercised).

• If the Performance Rights or a portion of the
Performance Rights vest, the participant is
entitled to proportionally receive, all dividends
and other distributions, bonus issues or other
benefits payable to the Trustee in respect of
the shares allocated upon such vesting (or, in
the case of Performance Rights granted from
2016, upon vesting and exercise).

• For Performance Rights granted from 2014,
under certain circumstances involving a
change of control event (see ‘Change of
Control’ section below) or cessation of
employment, the Board has the discretion to
determine that an amount (Cash Settlement
Amount) will be paid in respect of
Performance Rights that vest, instead of
Shares being allocated.

• For Performance Rights granted from 2016,
shares are not automatically allocated upon
vesting. Instead, participants are entitled to
exercise each relevant Performance Right at
any time during the applicable exercise period
(Exercise Period) after vesting. The Exercise
Period will generally end seven years after
vesting of the relevant Performance Rights.
However, the Exercise Period may be
shortened in certain circumstances such as
cessation of employment or a change of
control event. Performance Rights that do not
vest as at the end of the vesting period will
lapse.

• If the Company conducts a rights issue, the

Board may in its discretion determine to offer
an additional number of Performance Rights
to participants, or to otherwise adjust the
number of Performance Rights held by the
participant at the time. Unless the Board
determines otherwise, any such new or
additional Performance Rights will be subject
to the same terms and conditions as the
original Performance Rights held by the
participant.

Entitlements
and benefits

5 0

2015

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Cessation of
employment

Change of
Control

• For Performance Rights granted prior to 2014,

unvested Performance Rights will lapse
unless, in the case of death, total and
permanent disablement, redundancy or
retirement, the Board determines otherwise.

• For Performance Rights granted from 2014,

on cessation of employment prior to
Performance Rights vesting, except to the
extent that the Board otherwise determines in
its absolute discretion within 20 business
days after employment ceasing, a pro rata
number of unvested Performance Rights will
lapse. The number of unvested Performance
Rights that lapse will be proportional to the
amount of the testing period that has not yet
elapsed at the time of employment ceasing. In
these circumstances, the Board also has
discretion under the ESP rules to determine,
within two months of employment ceasing,
that any of the remaining unvested
Performance Rights are forfeited.

• In the event of a change in control, the Board
may bring forward the testing date for the
performance conditions, or waive those
conditions, and/or (in the case of
Performance Rights granted from 2016)
shorten the Exercise Period for Performance
Rights that have already vested or that vest
subsequently. The Board may also, in its
discretion, determine that cash settlement
amounts will be paid in respect of any vested
Performance Rights. A change of control
event will generally occur upon an entity
acquiring unconditionally more than 50 per
cent of the issued shares of the Company, or
the Company being required, under a
takeover bid or scheme of arrangement, to
issue an aggregate number of shares greater
than the number existing before the issue (i.e.
a “reverse takeover”).

2.2.1 STI SCORECARD

For corporate objectives, minimum performance thresholds must be met for any STI payments to be made: Alumina
Limited must not make a net loss after tax excluding significant items at the end of the financial year or must declare a
dividend. In 2015 Alumina Limited achieved a profit even after significant items and declared and paid an interim and final
dividend. An outline of the corporate objectives and the results achieved are set out in Table 4 (there are some matters
relating to corporate objectives which are commercially sensitive and for that reason are not disclosed).

For personal objectives, individuals are assessed on their actual performance against annual individual commercial
objectives agreed to at the beginning of the performance period. These personal objectives related to key areas of
performance over which the individual had accountability and influence for the delivery of an outcome that is adding or
protecting value for Alumina Limited. An outline of the personal objectives set and the results achieved are set out in
Table 5 on page 53. For reasons of commercial sensitivity, some matters relating to personal objectives are not disclosed.

2.2.2 PERFORMANCE UNDER THE STI PLAN

Tables 4 and 5 below provide a summary assessment of performance against STI performance measures for 2015.

TABLE 4
Corporate Scorecard – 50% of Potential STI Award

SHORT-TERM DRIVERS

PERFORMANCE MEASURES

Financial objectives,
Cash flow (20% weighting)

Investment rating and gearing
(5% weighting)

Achieve 2015 cash flow distributions
from AWAC in excess of minimums
required under the joint venture
agreement.

Maintain key financial metrics
consistent with investment grade
credit rating:

(i) Funds from operations/debt >50%

(ii) Debt / EBITDA<2 times

Strategic objectives

• improving long term cost curve

Demonstrable progress on WA Energy
strategy:

positioning and options

• Complete an energy evaluation

• preserving shareholder interests

• Establish a viable energy alternative

(20% weighting)

(10% weighting)

• Complete pre-project planning for a
coal based energy option by the end
of 2015.

Develop a bauxite strategy to enhance
the value of the resource position

(25% weighting)

Renegotiate joint venture sales
agreement

PERFORMANCE RESULT
AND ASSESSMENT

At target
Distributions of US$106 million
received during 2015.

Surpassed target
Funds from operations/total debt
85%. Full year forecast for Net debt/
EBITDA is 1.1 times.

Surpassed target
Influenced the successful completion
of the Apache gas contract

Study of energy options were
undertaken however this ceased as a
result of the Apache gas contract.

At target
Influenced the introduction of a
strategy for external bauxite sales.

Established relationships with
potential third party purchasers.

Surpassed target
Substantial progress in introducing
API transfer pricing basis for AWAC’s
related party alumina sales.

(20% weighting)

Develop business strategy options.

Not achieved
Project deferred.

TABLE 5
Personal objectives – 50% of potential STI award (The application of personal objectives vary for each executive)

PERFORMANCE MEASURES

PERFORMANCE RESULT ASSESSMENT

Resolve the pricing basis of certain contracts
(weighting 10–15%)

Not achieved
Partial agreement.

Hold Alumina Limited costs flat to 2014
(10% weighting)

At target
Achieved

Analyse and recommend to the Board a method to
distribute surplus franking credits

(10–15% weighting)

Surpassed target
Partially underwritten DRP implemented for the interim
dividend.

Protect Alumina’s rights during portfolio restructure
(15% weighting)

At target
Progressing according to Plan.

Resolve application of alumina production limit in Brazil for
Alcoa (20% weighting)

At target
Achieved.

Ensure AWAC asset sales do not disadvantage Alumina
Limited (20–40% weighting)

Surpassed target
Achieved.

Verify intercompany charges for AWAC and related party
transactions with Alcoa (15% weighting)

Not achieved
In progress.

Resolve the treatment of certain Alcoa Brazilian alumina
tonnage (20–25% weighting)

Not achieved
In progress.

Net (Loss)/Profit after tax excluding significant items

The Board established AWAC portfolio rationalisation as a priority for management. This requires management to engage
closely and co-operatively with Alcoa regarding the execution of closures, curtailments, and divestments.

In 2015, restructuring of the AWAC asset portfolio continued with the curtailment of the Suralco alumina refinery in
Suriname and the Point Comfort refinery in Texas resulting in combined equity accounted restructuring charges of
US$122.7 million. Additional restructuring charges in relation to the closure of the Anglesea power station and asset write
offs totalling US$24.6 million also contributed to a negative adjustment to profit. The curtailment of Suralco and the Point
Comfort production were consistent with the strategy to reshape AWAC’s asset portfolio by removing refining capacity
that is not competitive and to improve AWAC’s cost profile in the face of challenging market conditions.

In deciding whether it is appropriate to use adjusted earnings within the STI scheme, the board considers factors
including:

• the rationale and circumstances causing the adjustment, or simply put, was it the right thing to do?

• the impact on shareholders.

• was the matter caused by error or poor judgement.

• was the matter within management’s control (e.g. legacy matters).

• the Audit and Risk Committee’s review of these matters.

5 3

2.2.3 LTI PLAN PERFORMANCE TESTING

In Decemer 2015, the Performance Rights granted in 2013 were tested (three year performance test) and the 2012
Performance Rights were retested for the second and final time. Although both tranches failed the performance test in
relation to the ASX Comparator Group, they both exceeded the minimum vesting criteria of 50 per cent for the
International Comparator Group. This resulted in a partial vesting of Performance Rights to eligible participants.

Retesting was abolished for Performance Rights grants from 2014 onwards.

TSR Performance Results for the years 2011 to 2015

Percentile ranking of TSR against ASX 100
Comparator Group

International Comparator Groups

Percentage of total remuneration relating
to vested LTI5

2015

351

482

673

744

15%

2014

2013

2012

Nil

2011

Nil

1 TSR percentile ranking of approximately 35 is applicable to Performance Rights granted in 2012 under the ESP against the ASX Comparator Group,

performance period 12 December 2011 to 11 December 2015 (second retest), calculated on the average closing share price over the 20 trading days up
to and including the start of the performance period, and on the average closing share price over the 20 trading days up to and including the end of the
performance period.

2 TSR percentile ranking of approximately 48 is applicable to Performance Rights granted in 2013 under the ESP against the ASX Comparator Group,

performance period 8 December 2012 to 7 December 2015, calculated on the average closing share price over the 20 trading days up to and
including the start of the performance period, and on the average closing share price over the 20 trading days up to and including the end of the
performance period.

3 TSR percentile ranking of approximately 67 is applicable to Performance Rights granted in 2012 under of the ESP against the International Comparator
Group, performance period 12 December 2011 to 11 December 2015 (second retest), calculated on the average closing share price over the 20 trading
days up to and including the start of the performance period, and on the average closing share price over the 20 trading days up to and including the end
of the performance period. The testing of the 2012 International Comparator Group was against a comparator of seven aluminium or alumina companies
listed on overseas exchanges.

4 TSR percentile ranking of approximately 74 is applicable to Performance Rights granted in 2013 under of the ESP against the International Comparator
Group, performance period 8 December 2012 to 7 December 2015, calculated on the average closing share price over the 20 trading days up to and
including the start of the performance period, and on the average closing share price over the 20 trading days up to and including the end of the
performance period. The testing of the 2013 International Comparator Group was against a comparator group of seven aluminium or alumina companies
listed on overseas exchanges.

5 Represents the average applicable to senior executives (excludes the CEO who did not receive vested Performance Rights in 2015).

2012 and 2013 LTI testing against the International Comparator Group

The International Comparator Group typically comprises eight companies. However in 2015 testing could only be
measured against seven companies due to one company, Shandong Nanshan ceasing trading.

International Comparator Group – 2015 Review

In 2015 the composition of the International Comparator Group was reviewed by the Compensation Committee to assess
the applicability of comparator group companies, with an intention to potentially broaden the number of industry specific
companies within the group. The Compensation Committee is mindful of including a sufficient number of companies in
the comparator group, while ensuring the companies selected are relevant in assessing Alumina Limited’s performance.

A number of companies were considered however their lack of free float or liquidity in their shares was an impediment.
The Compensation Committee sought submissions from management and external consultants, and following rigorous
consideration, agreed on an international comparator group for the aluminium industry. The approved comparator
companies for the international comparator group from 2016 onwards is Alcoa Inc., South32 (new), Chalco, Hindalco
Industries, Norsk Hydro, Yunnan Aluminium (new), Century Aluminium and China Hongqiao (new) (Shandong Nanshan has
now been excluded on the basis that it has ceased trading).

5 4

2.3 EXECUTIVE KMP REMUNERATION AND EQUITY GRANTED IN 2015

The following tables contain the components that form the total statutory remuneration paid in 2015 to the Company’s
CEO and senior executives. Remuneration outcomes presented in Table 6 are prepared in accordance with relevant
accounting standards.

TABLE 6
Chief Executive Officer’s and Senior Executives Remuneration For The Year Ended 31 December 2015

SHORT-TERM BENEFITS
Non-
Monetary3

STI2

Other4

FAR1

POST-
EMPLOYMENT
BENEFITS
Super-
annuation5

Total

SHARE BASED PAYMENTS
Performance
rights6

FAR1

Total

TOTAL
REMUNERA-
TION

1,171,254

375,000

30,661

10,344

1,587,259

19,046 213,205

217,109 430,314

2,036,619

KMP

Peter Wasow
(CEO)

YEAR

2015

Chris
Thiris
(CFO)

Stephen
Foster
(General
Counsel/
Company
Secretary)

Andrew
Wood
(Group
Executive
Strategy
and
Development)

Total
Executive
remuneration

2014

1,131,721

300,000

28,120

129,516

1,589,357

18,279 122,222

125,240 247,462

1,855,098

2015

656,454

368,000

25,839

2014

2015

2014

2015

2014

638,021

344,000

23,368

492,935

275,000

24,866

476,739

255,000

22,105

345,454

108,000

11,045

333,821

111,000

14,347

–

1,050,293

34,946

1,005,389

29,979

792,801

23,565

753,844

22,261

464,499

19,046

459,168

18,279

–

230,049 230,049

1,315,288

168,690 168,690

1,204,058

172,096 172,096

988,462

161,748

937,853

68,698

552,243

57,033

534,480

2015

2,666,097

1,126,000

92,411

10,344

3,894,852

96,603 213,205

687,952

901,157

4,892,612

2014

2,580,302 1,010,000

87,940

129,516

3,807,758

88,798 122,222

512,711 634,933

4,531,489

1 Short-Term FAR is the total cost of salary, exclusive of superannuation. FAR for Mr Wasow includes a conditional rights share based payment that is
amortised over an 18 month (conditional) period. In 2015, Mr Wasow received 114,930 conditional rights calculated by dividing the aggregate grant
value of $207,000 by an independently determined Volume Weighted Average Price (VWAP) of $1.8011 per right. The grant date was 7 January 2015
with release date of 28 December 2017. The rights vest immediately after the 18 month (conditional) period and only then is Mr Wasow entitled to any
benefits or entitlements attaching to the shares. While Mr Wasow is employed by the Company, and unless the Board otherwise determines, he may
not dispose of or otherwise deal or purport to deal with any Shares transferred to him upon vesting of the Award, until (and including) the Release Date.
In 2014, Mr Wasow was the recipient of 164,908 share rights at a VWAP of $1.2128. The grant date was 10 February 2014.

2 Short-term incentive payments reflect the cash value paid for the years ended 31 December 2015 and 31 December 2014.

3 Non-monetary benefits represent accrued long service leave and value of the car park.

4 Other short-term benefits include personal financial advice allowance and travel allowance. For 2014 it also includes relocation costs for Mr Wasow.

5 Superannuation contributions reflect the SGC payment.

6 In accordance with AASB 2, the value attributed to Performance Rights represents the amortisation for the reporting period of the value at grant date

of all previously granted Performance Rights that have neither vested nor lapsed. The value at grant date is amortised over a three year period.

5 5

TABLE 7
2015 STI Outcomes

The following table indicates the actual value of STI paid to the CEO and senior executives and the percentage of total
potential STI paid and forfeited by each executive.

KMP

Peter Wasow (CEO)

Chris Thiris (CFO)

Stephen Foster (General Counsel/Company Secretary)

Andrew Wood (Group Executive Strategy and
Development)

Total Executive Remuneration

YEAR

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

STI PAID

375,000

300,000

368,000

344,000

275,000

255,000

108,000

111,000

1,126,000

1,010,000

PERCENTAGE

PAID

91%

75%

76%

74%

76%

73%

59%

63%

78%

73%

FORFEITED

25%

24%

26%

24%

27%

41%

37%

22%

27%

The following Performance Rights were granted in January 2015: Chris Thiris 162,900, Stephen Foster 122,400 and
Andrew Wood 64,400. Mr Wasow also received 243,900 Performance Rights as per his contract and approved by
shareholders at the 2015 Annual General Meeting.

The terms and conditions of each grant of Performance Rights affecting remuneration in the previous, current or future
reporting periods are as follows:

TABLE 7A

GRANT DATE

08/02/20132

10/02/20143

05/01/2015

END OF PERFORMANCE PERIOD

VALUE PER PERFORMANCE
RIGHT AT GRANT DATE1
$

07/12/2015

06/12/2016

11/12/2017

0.875

0.93

1.13

1 Value per Performance Right is independently calculated by Mercer Consulting (Australia) using the assumptions underlying the Black–Scholes

methodology to produce a Monte Carlo simulation model which allows the incorporation of the hurdles that must be met before the Performance
Rights vest.

2 Performance Rights granted between 2009 and 2013 are subject to retesting six months and 12 months after the conclusion of the three year

Performance Period should the Rights not completely vest at the end of the Performance Period. Any Rights that do not vest after the second retest
will lapse. For Performance Rights granted under LTI in February 2012 and tested in December 2014 were subject to two further tests applied over a
(four week period) six and 12 months after the initial test. The testing of those Performance Rights in 2015 resulted in approximately 45% of those
Performance Rights being awarded, and 55% lapsing. For Performance Rights granted in February 2013 and tested in December 2015, 49% of these
Performance Rights vested and the remainder are subject to retest in June 2016 and December 2016 (refer to Table 9 for detail on the outcome).

3 Retesting was abolished for the 2014 and subsequent Rights grants.

5 6

Set out below are the assumptions made for the Performance Rights granted on 5 January 2015:

Share price at valuation date

Risk free rate

Dividend yield

Volatility

Initial TSR

Post-vesting withdrawal rate

$1.825

2.15%

2.0%

38%

7.5%

Nil

TABLE 8
Value of Performance Rights For The Years Ended 31 December 2015 and 31 December 2014

2015

(A)

(B)

(C)

(D)

(E)

Director/Senior
Executive

Year

Peter Wasow

Chris Thiris1

Stephen Foster

Andrew Wood

2015

2014

2015

2014

2015

2014

2015

2014

Value granted
Performance
Rights $

Value vested
Performance
Rights $

Value lapsed
Performance
Rights $

Total Column
Performance
Rights A+B-C
$

Value as
proportion of
remuneration
%

275,607

375,720

–

184,077

163,991

–

275,607

375,720

348,068

251,007

138,312

187,488

72,772

66,123

192,400

(59,204)

271,508

71,021

67,831

23,454

(89,194)

(20,850)

(29,457)

169,315

119,753

60,120

13.58%

20.29%

26.46%

20.85%

27.47%

18.05%

21.68%

11.25%

Table 8 shows the total value of any Performance Rights granted, exercised and lapsed in the year in relation to Directors and senior executives, based
on the following assumptions:

(A) The value of Performance Rights granted in the year reflects the value of a Performance Right, multiplied by the number of Performance Rights granted
during 2014 and 2015. Performance Rights were valued independently by Mercer Consulting (Australia) using the assumptions underlying the Black-
Scholes methodology to produce a Monte Carlo simulation model that accommodates features associated with Alumina Limited’s ESP such as
exercise, lapsed and performance hurdles. The rights are those granted in 2014 and 2015.

(B) The value of Performance Rights vesting is determined by the number of vested rights multiplied by the market price at the vesting date.

(C) The value applicable to Performance Rights at lapse date has been determined by using the value at grant date as calculated by Mercer Consulting

(Australia) multiplied by the number of rights which have lapsed.

(D) The total value is the sum of the value of Performance Rights granted during 2015, plus the value of Performance Rights vested during 2015, less the

value of Performance Rights that lapsed during 2015.

(E) Total value of Performance Rights expressed as a percentage of total remuneration.

1 Mr Thiris’ first tranche of Performance Rights tested in 2015 that resulted in partial vesting, are subject to retest in 2016, hence he did not have any

lapsed Performance Rights in 2015.

TABLE 9
Senior Executive – Number of Performance Rights for the Years Ended 31 December 2015
and 31 December 2014

YEAR

BALANCE AT
1 JANUARY1

NUMBER
GRANTED DURING
THE YEAR AS
REMUNERATION2

NUMBER
VESTED
DURING
THE YEAR

NUMBER
LAPSED
DURING
THE YEAR3

NUMBER
EXERCISED
DURING THE
YEAR

BALANCE AT 31
DECEMBER

CEO

Peter Wasow

Senior Executives

Chris Thiris4

2015

2014

2015

2014

404,000

–

561,400

291,500

243,900

404,000

–

162,900

(143,224)

269,900

–

Stephen Foster

2015

555,600

122,400

(168,035)

(75,228)

2014

440,600

201,600

(42,662)

(43,938)

Andrew Wood

2015

195,900

64,400

(59,241)

(26,493)

2014

153,400

71,100

(14,089)

(14,511)

–

647,900

404,000

581,076

561,400

434,737

555,600

174,566

195,900

1 Includes the number of Performance Rights granted that were subject to testing in 2015 but not yet vested.

2 Performance Rights granted in January 2015 for the three year performance test period concluding in December 2017.

3 Performance Rights granted under ESP in February 2012 and tested in December 2014 were subject to two further tests applied at

six and 12 months after the initial test (over a four week testing period). The testing of those Performance Rights in 2015 resulted in approximately 45%
of those Performance Rights being awarded, and 55% lapsing. For Performance Rights granted in February 2013 and tested in December 2015, 49% of
these Performance Rights vested and the remainder are subject to retest in June 2016 and December 2016.

4 Mr Thiris first tranche of Performance Rights tested in 2015 that resulted in partial vesting, are subject to retest in 2016, hence he did not have any

lapsed Performance Rights in 2015.

5 8

TABLE 10
Details of Performance Rights Granted as Remuneration

RIGHTS
NUMBER1

DATE OF
GRANT

% VESTED
IN 2015

% FORFEITED
IN 2015

PERFORMANCE
RIGHTS YET TO
VEST

FINANCIAL
YEAR IN
WHICH
GRANTS MAY
VEST6

VALUE OF RIGHTS
OUTSTANDING 31/12/157

$MIN2

$MAX3

–

CEO

Peter
Wasow

2015

2014

243,900 Jan–154

404,000 Feb–144

Senior Executives

Chris
Thiris5

Stephen
Foster

Andrew
Wood

2015

2014

2013

2015

2014

2013

2012

2015

2014

2013

2012

162,900

Jan–15

269,900

Feb–14

291,500

Feb–13

49.13

122,400

Jan–15

201,600

Feb–14

217,700

Feb–13

136,300 Mar–12

64,400

Jan–15

71,100

Feb–14

76,800

Feb–13

48,000 Mar–12

–

49.13

44.81

–

49.13

44.81

–

55.19

–

55.19

243,900

404,000

162,900

269,900

148,276

122,400

201,600

110,737

–

64,400

71,100

39,066

–

2017

2016

2017

2016

2015

2017

2016

2015

2014

2017

2016

2015

2014

–

275,607

375,720

184,077

251,007

129,742

138,312

187,488

96,895

–

72,772

66,123

34,183

–

1 The terms of Performance Rights granted to Mr Thiris, Mr Foster and Mr Wood were not altered during 2015. Mr Wasow’s LTI entitlement had a ceiling

of $414,000 in 2015 otherwise the Performance Rights conditions applicable to his grant are substantially the same as the other senior executives.

2 The minimum value of the grant is $nil if the performance conditions are not met.

3 The maximum value has been calculated by reference to valuations determined on the basis as outlined in Note 1 in Table 7a on page 56.

4 Mr Wasow’s Performance grants were granted subject to shareholder approval at the relevant Annual General Meetings held in the May of the year

in which they were granted.

5 Mr Thiris was appointed Chief Financial Officer in December 2011. The LTI incentive was not applicable for his service in 2011.

6 Performance Rights granted before 2014 that do not vest at the conclusion of their three year testing period are subject to retesting six and 12 months
after the initial test. For Performance Rights granted in 2014 and onwards, there is no retesting. Following testing, any Performance Rights that do not
vest are forfeited.

7 This shows the fair value of the Performance Rights at grant date. Refer to Tables 6 for amounts expensed in accordance with AASB 2.

SENIOR EXECUTIVE SHAREHOLDING

TABLE 11
Senior Executive Shareholdings for the Years Ended 31 December 2015 and 31 December 2014

SHARES
ACQUIRED
DURING THE YEAR
UNDER
EMPLOYEE SHARE
PLAN2

BALANCE OF
SHARES AS AT 1
JANUARY1

50,000

69,500

40,000

346,304

281,795

51,769

37,680

–

143,224

–

168,035

42,662

59,241

14,089

OTHER SHARES
ACQUIRED
DURING THE YEAR

SHARES SOLD
DURING THE YEAR

BALANCE OF
SHARES HELD AT
31 DECEMBER

164,908

–

50,500

29,500

37,503

21,847

–

(40,000)

–

214,908

50,000

263,224

69,500

511,842

346,304

111,010

51,769

Peter Wasow

Chris Thiris

Stephen Foster

Andrew Wood

2015

2014

2015

2014

2015

2014

2015

2014

1 Balance of shares held at 1 January and 31 December of the respective years include directly held, and nominally held shares, and shares held

by personally related entities.

2 Includes vested 2012 Performance Rights that were tested in June 2015 and December 2015 and 2013 Performance Rights that were tested in

December 2015.

5 9

2.3.1 EXECUTIVES’ SERVICE AGREEMENTS

Remuneration and other terms of employment for executives are formalised in service agreements. The service
agreements specify the components of remuneration, benefits and notice periods. Participation in the STI and LTI plans
is subject to the Board’s discretion. On cessation of employment, all executives are entitled to a pro-rata payment of
long service leave (after three or more years of continuous service) and accrued annual leave.

In addition, Mr Wasow is entitled to obtain personal financial advice up to a maximum of $3,000 per annum and receive
an additional 10 days of paid leave for each completed year of service.

Major provisions of the agreements relating to remuneration are set out below.

Termination benefits are within the limits set by the Corporations Act 2001 (Cth) such that they do not require
shareholder approval.

TERM OF AGREEMENT
AND NOTICE PERIOD

Peter Wasow

No fixed term

12 month written notice from
either party. Mr Wasow’s
employment may be terminated
immediately for any conduct that
would justify summary dismissal.

TERMINATION PAYMENTS1

• A severance payment of 2.5 weeks per complete year of service, pro-rated for

completed months of service.

• 13 weeks ex gratia payment.

• Number of shares equal to the granted conditional rights that would have

vested during notice period.

• Company may make a discretionary payment in lieu of some or all of the notice

period.

• If the Board determines that he is a good leaver, any unvested conditional share

rights that have been granted and would have vested had he remained in
employment during any period for which he is paid in lieu of notice, will
immediately vest and the applicable shares will be transferred to him upon
termination.

• If the Board determine that his status is not that of a good leaver, the shares

received on vesting may be subject to immediate forfeiture.

Chris Thiris and Stephen Foster

No fixed term

• An additional payment which is the greater of:

Six month notice from the
Company, three month from
Mr Thiris

Andrew Wood

No fixed term,

Four month notice from the
Company, two month from
Mr Wood

» A payment equivalent to six months Base Remuneration; or

» A payment comprising:

›

Notice payment (the greater of 12 weeks or notice provided within
employment contract).

severance payment of 2.5 weeks per complete year of service, pro-rated for
completed months of service; and

›

nine weeks ex gratia payment.

• An additional payment which is the greater of:

» A payment equivalent to six months Base Remuneration; or

» A payment comprising:

›

Notice payment (the greater of 12 weeks or notice provided within
employment contract).

severance payment of 2.5 weeks per complete year of service, pro-rated
for completed months of service; and

›

six weeks ex gratia payment.

1 Payable upon termination with notice and without the cause (eg for reasons other than unsatisfactory performance) and suitable alternative employment
is not offered or if they do not accept other employment or in the event of a significant change (which is defined to be if Alumina Limited ceases to be
listed on the ASX or if there is a significant change to the executives status and/or responsibilities that is detrimental to the executive). Calculated
according to the “Base Remuneration”, which is defined as FAR for Mr Wasow; and FAR + STI at target for Mr Thiris, Mr Foster and Mr Wood. The above
termination entitlements are subject to any restrictions imposed by the Corporations Act.

6 0

3. NON-EXECUTIVE DIRECTORS REMUNERATION

The maximum remuneration for Non-Executive Directors is determined by resolution of shareholders. As approved at the
2011 AGM, the maximum aggregate remuneration approved for Non-Executive Directors is currently $1,250,000 per
annum. A total of $1,116,249 was paid in Non-Executive Director fees in 2015.

In 2015 Non-Executive Director’s base fees remained unchanged from the fee level set in 2011. In addition to the base fee,
Non-Executive Directors receive fees for participation on the Board Committees and Superannuation
Guarantee Contributions.

Committee Member

$10,000 (aggregate)

Compensation Committee Chair1

Audit & Risk Committee Chair

Other Committee Chair

$15,000

$10,000

1 Effective from 1 January 2015, the Chair of the Compensation Committee receives an additional $5,000 in recognition of the increased workload.

Non-Executive Directors participation on Board Committees is set out on page 15.

Non-Executive Directors do not receive any other retirement benefits or performance based incentives, rights or options.

The Board reviewed Non-Executive Directors’ fees and determined in the context of business conditions that there would
be no increase for the 2016 year.

3.1 REMUNERATION OUTCOMES

Non-Executive Directors’ remuneration details are set out below in Table 13.

TABLE 13

John Pizzey

Emma Stein

Chen Zeng

Peter Day

Mike Ferraro 2

Total

SHORT-TERM BENEFITS

POST EMPLOYMENT

FEES – CASH

NON-MONETARY
BENEFITS

SUPERANNUATION
GUARANTEE1

TOTAL
REMUNERATION

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

357,425

358,191

174,174

169,395

159,430

174,174

174,359

169,198

151,059

1,034,216

1,012,434

–

19,045

18,279

16,576

15,905

14,969

16,576

16,371

16,102

14,210

82,033

79,734

376,470

190,750

185,300

174,399

190,750

190,730

185,300

165,269

1,117,670

1,092,168

1 Non-Executive Directors receive, in addition to their fees, a SGC. For 2014, this was initially 9.25 per cent (and adjusted to 9.5 per cent. in July 2014).

For 2015, the applicable rate was 9.5 per cent.). Non-Executive Directors do not receive any other retirement benefits.

2 Mr Ferraro’s increase in the value of remuneration from 2014 was the combination of Mr Ferraro being appointed Chair of the Nomination Committee in

2015 and his 2014 remuneration relates only to an 11 month period (Mr Ferraro was appointed a Non-Executive Director in February 2014).

Financial Report

3.2 NON–EXECUTIVE DIRECTOR SHARE HOLDINGS

Each Non-Executive Director is required to hold shares in the Company having a value at least equal to 50 per cent of
their annual fees at the expiry of five years from appointment as directors. The requirement is satisfied when shares are
acquired or by the expiry of the five year term.

TABLE 14
Non–Executive Director Shareholdings for the Years Ended 31 December 2015 and 31 December 2014

BALANCE OF SHARES AS AT
1 JANUARY1

OTHER SHARES ACQUIRED
DURING THE YEAR

BALANCE OF SHARES
HELD AT 31 DECEMBER

John Pizzey

Emma Stein2

Chen Zeng3

Peter Day4

Mike Ferraro5

2015
2014

65,445
65,445

58,408
39,781

4,804
4,804

54,800
–

–
–

17,400
18,627

–
–

20,920
54,800

25,000
–

65,445
65,445

75,808
58,408

4,804
4,804

75,720
54,800

25,000
–

1 Balance of shares held at 1 January and 31 December of the respective years include directly held shares, nominally held shares, and shares held by

personally related entities.

2 Ms Stein purchased 17,400 shares directly in her name.

3 Mr Zeng is a nominee of CITIC and CITIC holds 525,789,531 ordinary shares in Alumina Limited.

4 Mr Day purchased 20,920 shares directly in his name.

5 Mr Ferraro purchased 25,000 shares indirectly via the trustee company of the Ferraro Super Fund, of which Mr Ferraro is a beneficiary.

This report is made in accordance with a resolution of the Directors.

GJ PIZZEY
Chairman

15 March 2016

6 2

Financial Report

6 3

The financial report covers the consolidated entity consisting of Alumina Limited
(the Company) and its subsidiaries. The financial report is presented in US dollars.

Alumina Limited is a Company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is: Alumina Limited,
Level 12, IBM Centre, 60 City Road, Southbank Victoria 3006.

A description of the nature of the consolidated entity’s operations and its principal
activities is included in the operating and financial review on pages 18–31 of the
annual report. The operating and financial review is not part of this financial report.

The financial report was authorised for issue by the Directors on 15 March 2016.

Through the use of the internet, we have ensured that our corporate reporting is
timely and complete. All press releases, financial reports and other information are
available at our Investor Centre on our website: www.aluminalimited.com.

CONTENTS

FINANCIAL STATEMENTS

Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

About this report

Group structure and AWAC Performance

1 Segment information
2
3

Investments in associates
Investments in controlled entities

Financial and Capital Risk

4 Financial assets and liabilities
5 Financial risk management
6 Capital management

65
66
67
68

70
71
74

75
77
81

Key numbers

Income tax expense

7 Expenses
8
9 Equity
10 Cash flow information

Other Information

11 Related party transactions
12 Share-based payments
13 Remuneration of auditors
14 Commitments and contingencies
15 Events occurring after the reporting period
16 Parent entity financial information
17 Deed of cross guarantee
18 New accounting standards and interpretations

not yet adopted

SIGNED REPORTS

Directors’ declaration
Independent auditor’s report to the members
of Alumina Limited

82
83
85
87

87
88
89
89
89
89
91

6 4

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015

Revenue from continuing operations

Share of net profit/(loss) of associates accounted for using the equity method

Other income

General and administrative expenses

Change in fair value of derivatives/foreign exchange losses

Finance costs

Profit/(loss) before income tax

Income tax expense

Profit/(loss) for the year attributable to the owners of Alumina Limited

Other comprehensive (loss)/income

Items that may be reclassified to profit or loss

Share of reserve movements accounted for using the equity method

Foreign exchange translation difference

Items that will not be reclassified to profit or loss

Re-measurements of retirement benefit obligations accounted for using the
equity method

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year attributable to the owners of
Alumina Limited

NOTES

US$ MILLION

2(c)

7(a)

7(b)

9(c)

9(b)

2015

0.1

109.9

–

(11.9)

(3.2)

(6.6)

88.3

–

88.3

2014

0.1

(73.6)

1.5

(13.5)

1.6

(13.6)

(97.5)

(0.8)

(98.3)

(0.7)

(452.2)

(0.6)

(224.6)

32.0

(420.9)

(46.6)

(271.8)

(332.6)

(370.1)

Earnings per share for profit/(loss) from continuing operations attributable to the
ordinary equity holders of the Company:

Basic earnings per share

Diluted earnings per share

9(a)

3.1¢

(3.5¢)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.

6 5

CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2015

CURRENT ASSETS

Cash and cash equivalents

Receivables

Other assets

Total current assets

NON-CURRENT ASSETS

Investments in associates

Property, plant and equipment

Total non-current assets

TOTAL ASSETS

CURRENT LIABILITIES

Payables

Provisions

Current tax liabilities

Other

Total current liabilities

NON-CURRENT LIABILITIES

Borrowings

Derivative financial instruments

Provisions

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Treasury shares

Retained earnings

Reserves

TOTAL EQUITY

NOTES

US$ MILLION

2015

2014

4(a)

9.3

–

3.3

12.6

24.9

0.2

3.5

28.6

2(c)

2,098.0

2,514.5

0.1

2,098.1

2,110.7

0.1

2,514.6

2,543.2

1.7

0.2

–

0.2

2.1

110.5

14.7

0.5

125.7

127.8

1.9

0.2

0.8

0.2

3.1

111.5

4.1

0.5

116.1

119.2

1,982.9

2,424.0

2,682.9

2,620.0

(1.4)

607.3

(1,305.9)

1,982.9

(1.2)

658.2

(853.0)

2,424.0

4(b)

4(c)

9(a)

9(b)

9(c)

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

6 6

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015

NOTES

US$ MILLION

Balance as at 1 January 2014

Loss for the year

Other comprehensive loss for the year

Transactions with owners in their capacity as
owners:

Movement in treasury shares

9(a)

Movement in share based payments reserve

Balance as at 31 December 2014

Contributed
Equity1

Reserves

2,618.7

(628.4)

–

0.1

–

(225.2)

–

0.6

Retained
Earnings

803.1

(98.3)

(46.6)

Total

2,793.4

(98.3)

(271.8)

–

0.1

0.6

2,618.8

(853.0)

658.2

2,424.0

Balance as at 1 January 2015

Profit for the year

Other comprehensive (loss)/income for the year

Transactions with owners in their capacity as
owners:

Dividends paid

Dividend reinvestment plan

Movement in treasury shares

Balance at 31 December 2015

1 Treasury shares have been deducted from contributed equity.

2,618.8

(853.0)

–

9(a)

62.9

(0.2)

–

(452.9)

–

658.2

88.3

32.0

(171.2)

–

2,424.0

88.3

(420.9)

(171.2)

62.9

(0.2)

2,681.5

(1,305.9)

607.3

1,982.9

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015

Cash flows from operating activities

Payments to suppliers and employees (inclusive of goods and services tax)

GST refund received

Dividends received from associates

Distributions received from associates

Interest received

Finance costs

Interest paid under cross currency interest rate swap

Interest received under cross currency interest rate swap

Other

Net cash inflow/(outflow) from operating activities

Cash flows from investing activities

Payments for investment in associates

Return of capital from associates

Net cash inflow from investing activities

Cash flows from financing activities

Proceeds from note issue

Repayment on termination of cross currency interest rate swap

Proceeds from borrowings

Repayment of borrowings

Dividends paid

Net cash outflow from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Effects of exchange rate changes on cash and cash equivalents

NOTES

US$ MILLION

2015

2014

10(a)

2(c)

5(a)

(12.1)

0.4

61.4

1.5

–

(8.4)

(3.3)

5.2

(1.1)

43.6

(2.4)

43.4

41.0

–

110.0

(100.0)

(108.2)

(98.2)

(13.6)

24.9

(2.0)

9.3

(15.0)

0.5

16.0

4.3

0.1

(12.5)

–

(1.0)

(7.6)

(41.5)

98.9

57.4

107.1

(6.9)

55.0

(202.6)

–

(47.4)

2.4

24.0

(1.5)

24.9

Cash and cash equivalents at the end of the financial year

4(a)

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

6 8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

ABOUT THIS REPORT

Alumina Limited (Company or parent entity) is a for profit
company limited by shares incorporated and domiciled in
Australia whose shares are publicly traded on the
Australian Securities Exchange. The consolidated financial
report of the Group for the year ended 31 December 2015
was authorised for issue in accordance with a resolution of
the directors on 15 March 2016.

The consolidated financial report is a general purpose
financial report which:

• incorporates assets, liabilities and results of operations

of all of Alumina Limited’s subsidiaries and equity
accounts its associates. For the list of the Company’s
associates and subsidiaries refer Notes 2(a) and 3
respectively.

• has been prepared in accordance with the requirements
of the Corporations Act 2001, Australian Accounting
Standards and Interpretations issued by the Australian
Accounting Standards Board (AASB). Alumina Limited is
a for profit entity for the purpose of preparing the
financial statements.

• complies with International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board.

• has been prepared under the historical cost convention,
as modified by the revaluation of certain financial assets
and liabilities (including derivative instruments) at fair
value through profit or loss.

• is presented in US dollars and all amounts are rounded
off to the nearest hundred thousand dollars, unless
otherwise stated, in accordance with Class Order 98/100
issued by the Australian Securities and Investment
Commission.

• adopts all new and amended Accounting Standards and
Interpretations issued by the AASB that are effective for
the annual reporting period beginning 1 January 2015.

• does not early adopt Accounting Standards and

Interpretations that have been issued or amended but
are not yet effective.

• presents reclassified comparative information where

required for consistency with the current year’s
presentation.

THE NOTES TO THE FINANCIAL STATEMENTS

The notes include information, which is required to
understand the financial statements and is material and
relevant to the operations, financial position and
performance of the Group. Information is considered
material and relevant if, for example:

• the amount in question is significant because of its size

or nature.

• it is important for the understanding of the results of the

Group.

• it relates to an aspect of the Group’s operations that is

important to its future performance.

The notes are organised into the following sections:

• Group structure and AWAC performance: explains the

group structure and information about AWAC’s financial
position and performance and its impact on the Group.

• Financial and capital risk: provides information about the
Group’s financial assets and liabilities and discusses the
Group’s exposure to various financial risks and explains
how these affect the Group’s financial position and
performance and what the Group does to manage these
risks. It also describes capital management objectives
and practices of the Group.

• Key numbers: provides a breakdown of individual line
items in the financial statements that the directors
consider most relevant and summarises the accounting
policies, judgements and estimates relevant to
understanding these line items.

• Other Information: provides information on items, which
require disclosure to comply with Australian Accounting
Standards and other regulatory pronouncements.
However, they are not considered critical in
understanding the financial performance of the Group
and are not immediately related to the individual line
items in the financial statements.

ACCOUNTING POLICIES

Significant and other accounting policies that summarise
the measurement basis used and are relevant to the
understanding of the financial statements are provided
throughout the notes to the financial statements.

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements are presented in
US dollars, which is Alumina Limited’s presentation and
functional currency.

Foreign currency transactions are translated into functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign
currencies are recognised in the profit or loss, except
when they are deferred in other equity as qualifying cash
flow hedges and qualifying net investment hedges or are
attributable to part of the net investment in a foreign
operation.

6 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

ABOUT THIS REPORT (continued)

The results and financial position of the Group entities and
associates that have a functional currency different from
the presentation currency are translated into the
presentation currency as follows:

• assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet.

• income and expenses are translated at average
exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions).

• all resulting exchange differences are recognised in

other comprehensive income.

• On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is
sold, its proportionate share of such exchange
differences are reclassified to the profit or loss, as part
of the gain or loss on sale.

GROUP STRUCTURE AND AWAC PERFORMANCE

1. SEGMENT INFORMATION
(a) Segment Description

Alumina Limited’s sole business undertaking is in the global
bauxite, alumina and aluminium industry, which it conducts
primarily through bauxite mining and alumina refining. All of
those business activities are conducted through its 40%
investments in AWAC. Alumina Limited’s equity interests in
AWAC forms a reportable segment. Equity interest in AWAC

is represented by investments in a number of entities in
different geographical locations (refer Note 2(a)).

Alumina Limited participates in AWAC through the Strategic
Council, which consists of three members appointed by
Alcoa Inc and two members appointed by Alumina Limited.

(b) Geographical Segment Information

YEAR ENDED 31 DECEMBER 2015

US$ MILLION

Investments in Associates

Other assets

Liabilities

Consolidated net assets

YEAR ENDED 31 DECEMBER 2014

Investments in Associates

Other assets

Liabilities

Consolidated net assets

Australia

1,132.3

12.0

(127.8)

1,016.5

Australia

1,072.5

27.2

(118.4)

981.3

Brazil

617.4

0.4

–

617.8

Other

348.3

0.3

–

Total

2,098.0

12.7

(127.8)

348.6

1,982.9

US$ MILLION

Brazil

908.2

0.7

–

Other

533.8

0.8

(0.8)

Total

2,514.5

28.7

(119.2)

908.9

533.8

2,424.0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

2. INVESTMENTS IN ASSOCIATES
(a) Alcoa World Alumina and Chemicals

Alumina Limited has an interest in the following entities forming AWAC:

NAME

PRINCIPAL ACTIVITIES

COUNTRY OF
INCORPORATION

Alcoa of Australia Limited

Alcoa World Alumina LLC

Alumina Espanola S.A.

Bauxite, alumina & aluminium production

Australia

Bauxite and alumina production

Alumina production

Alcoa World Alumina Brasil Ltda.

Bauxite and alumina production

AWA Saudi Ltda.

Enterprise Partnership

Bauxite and alumina production

Finance lender

America

Spain

Brazil

Hong Kong

Australia

PERCENTAGE
OWNERSHIP

2015

2014

The audited combined financial statements of the
entities forming AWAC are prepared in accordance with
Accounting Principles Generally Accepted in the United
States of America (US GAAP). Alcoa of Australia Limited
and Enterprise Partnership (AWAC entities) further issue
audited financial statements prepared in accordance with
the requirements of the Corporation Act 2001, Australian
Accounting Standards and interpretation issued by
Australian Accounting Standards Board.

For the remaining AWAC entities, adjustments are made to
convert the accounting policies under US GAAP to
Australian Accounting Standards. The principal
adjustments are to the valuation of inventories from last-in-
first-out basis to a basis equivalent to weighted average
cost, create an additional asset retirement obligation for
dismantling, removal and restoration of certain refineries
and differences in the recognition of actuarial gains and
losses on certain defined benefit plans and the reversal of
certain fixed asset uplifts included in Alcoa World Alumina
Brasil Ltda.

In arriving at the value of these GAAP adjustments,
Management is required to use accounting estimates and
exercise judgement in applying the Group’s accounting
policies. The note below provides an overview of the areas
that involved a higher degree of judgement or complexity.

(b) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and
are based on historical experience and other factors,
including expectations of future events that may have a
financial impact on the Group and that are believed to be
reasonable under the circumstances. The resulting
accounting estimates will by definition, seldom equal the
related actual results. The estimates and judgements that
have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the
next financial year are disclosed below.

Retirement benefit obligations

The Group recognised a net liability for retirement benefit
obligations under the defined benefit superannuation
arrangements through its investment in AWAC. All plans
are valued in accordance with AASB 119 Employee

Benefits. These valuations require actuarial assumptions
to be made. All re-measurements are recognised in other
comprehensive income.

Asset retirement obligations

The estimated costs of rehabilitating mined areas and
restoring operating sites are reviewed annually and fully
provided at the present value. The amount of obligations
recognised under US GAAP by AWAC is adjusted to be
in compliance with IFRS. This requires judgemental
assumptions regarding the extent of reclamation activities
required, plant and site closure and discount rates to
determine the present value of these cash flows.

Carrying value of investment in associates

The Group assesses at each reporting period whether
there is objective evidence that the investment in
associates may be impaired by:

• Performing an impairment trigger assessment to
consider whether indicators of impairment exist;

• Calculating the value in use of the investment in AWAC
using a discounted cash flow model (“DCF model”); and

• Comparing the resulting value to the book value.

The key assumptions used in the DCF model to estimate
future cash flows are those relating to future aluminium
and alumina prices, energy prices and exchange rates.
Key assumptions are determined with reference to industry
participants and brokers’ forecasts, commodity and
currency forward curves, industry consultant views and
brokers’ consensus.

These cash flows are then discounted to net present value
using the Company’s weighted average cost of capital
(WACC) of 9.5%.

Furthermore, a following sensitivity analysis (stress testing)
is performed over the value in use calculations:

• Commodities (including aluminium, alumina, caustic,
coal, oil and gas) price fluctuation plus or minus 10%.
The AWAC future cash flows are more sensitive to the
alumina price.

• Currency rate fluctuation plus or minus 10%.

• Increased discount rate (WACC).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

2. INVESTMENTS IN ASSOCIATES (continued)

As a final check, the book value of the investment in associates is compared to Alumina Limited’s market capitalisation
and to major analysts’ valuations.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

No impairment loss was recognised in the years ended 31 December 2015 and 31 December 2014.

The information disclosed in the tables below reflects the amounts presented in the AWAC financial statements amended to
reflect adjustments made by Alumina Limited when using equity method, including adjustments for differences in
accounting policies.

SUMMARISED BALANCE SHEET

US$ MILLION

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets

Group Share as a percentage

Group Share in dollars

Goodwill

Net value of mineral rights and bauxite assets

Deferred Tax Liability (DTL) on mineral rights and bauxite assets

Allocation of Alba settlement – Note 2(d)

Carrying value

Reconciliation to carrying amount:

Opening carrying value 1 January

Net additional (return)/funding in AWAC entities

Allocation of Alba settlement – Note 2(d)

Profit/(loss) for the year

Other comprehensive loss for the year

Dividends and distributions paid

Closing net assets

2015

1,504.9

5,643.0

(1,311.6)

(1,436.9)

4,399.4

40%

1,759.7

175.8

109.2

(35.5)

88.8

2014

1,563.1

6,834.4

(1,407.5)

(1,677.9)

5,312.1

40%

2,124.9

175.8

111.3

(36.1)

138.6

2,098.0

2,514.5

2,798.9

(41.0)

–

109.9

(422.5)

(62.9)

(57.4)

138.6

(73.6)

(271.7)

(20.3)

2,098.0

2,514.5

SUMMARISED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

US$ MILLION

Revenues

Profit/(loss) from continuing operation

Profit/(loss) for the year

Other comprehensive loss for the year

Total comprehensive loss for the year

Group Share of profit/(loss) for the year in percentage

Group Share of profit/(loss) for the year in dollars

Mineral rights and bauxite assets amortisation

Movement in DTL on mineral rights and bauxite assets

Share of profit/(loss) from associate accounted for using equity method

Dividends and distributions received from AWAC

2015

5,380.4

278.5

(1,052.3)

(773.8)

40%

111.4

(2.1)

0.6

109.9

62.9

2014

5,862.0

(180.2)

(679.5)

(859.7)

40%

(72.1)

(2.1)

0.6

(73.6)

20.3

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

2. INVESTMENTS IN ASSOCIATES (continued)

(d) Allocation of Alba settlement terms and related
transactions

In September 2012, Alcoa Inc and Alumina Limited had
entered into an allocation agreement that the cash costs
(including legal fees) of settlement of the Department of
Justice (DoJ) and Securities & Exchange Commission
(SEC) investigations (reached in January 2014), as well as
the $85 million civil settlement with Alba (reached in
October 2012) recorded in the accounts of Alcoa World
Alumina LLC (AWA), will be adjusted to ensure that 85%
will be allocated to Alcoa Inc and 15% to Alumina Limited.
AWA is a company within Alcoa World Alumina and
Chemicals.

To reflect the provisions of the allocation agreement, as at
31 December 2013, Alumina Limited recognised $137.1
million (representing 25% of the total Alba settlement
payments and costs) as other assets with the
corresponding credit recognised in the statement of profit
or loss as other income.

During 2014 it was resolved that the other assets
recognised as at 31 December 2013 in relation to this
matter will be recovered through Alcoa World Alumina LLC
equity allocations to Alumina Limited, funded by Alcoa Inc.
On this basis, the $137.1 million that was previously
recognised in other assets has been reclassified to
investments in associates.

In October 2014, Alumina Limited received the first equity
allocation of $21.3 million which included an additional $1.5
million “true up” of the previously recognised amount. This
additional amount was recognised as investment in
associates with the corresponding credit recognised in the
statement of profit or loss as other income. In January
2015, Alumina Limited received the second equity
allocation of $28.5 million. The balance of $88.8 million of
equity will be allocated over a three-year period with each
15th January instalment payment to the DoJ and SEC, with
the last allocation due in January 2018. Alumina Limited’s
interest in AWA will remain at 40%.

(e) Commitments and contingent liabilities in respect of
AWAC

St Croix proceedings
Lockheed Martin Corporation (Lockheed) filed a complaint
(the Lockheed Action) against Virgin Islands Aluminium
Company (Vialco) and its parent Glencore Xstrata Plc
(Glencore) in the United States District Court, Southern
District of New York following Lockheed’s settlement of
environmental lawsuits previously brought by the Government
of the US Virgin Islands against Lockheed and Vialco in
connection with the past ownership and operation of the
alumina refinery.

Glencore has demanded that St Croix Alumina LLC (SCA)
and Alcoa World Alumina LLC (AWA), AWAC entities,
indemnify Glencore from any losses incurred as a result of
the Lockheed Action under the 19 July 1995 Acquisition
Agreement (the 1995 Agreement) between Vialco and AWA
pursuant to which SCA purchased the refinery from Vialco.

AWA has denied that it owes Glencore any such obligation of
indemnity and has filed a declaratory judgement action in
Delaware seeking clarification of its rights and obligations
under the 1995 Agreement.

Alumina Limited is unable to reasonably predict an outcome
or to estimate a range of a reasonably possible loss in relation
to these legal proceedings.

As previously reported, on 14 January 2010, Alcoa was
served with a multi-plaintiff action complaint involving several
thousand individual persons claimed to be residents of St.
Croix who are alleged to have suffered personal injury or
property damage from Hurricane Georges or winds blowing
material from the SCA facility on the island of St. Croix (U.S.
Virgin Islands) since the time of the hurricane. This complaint,
Abednego, et al. v. Alcoa, et al. was filed in the Superior Court
of the Virgin Islands, St. Croix Division. Following an
unsuccessful attempt by Alcoa and SCA to remove the case
to federal court, the case has been lodged in the Superior
Court. The complaint names as defendants the same entities
as were sued in a February 1999 action arising out of the
impact of Hurricane Georges on the island and added as a
defendant the current owner of the alumina facility property.

As previously reported, on 1 March 2012, Alcoa was served
with a complaint involving approximately 200 individual
persons alleging claims essentially identical to those set forth
in the Abednego v. Alcoa complaint. This complaint,
Abraham, et al. v. Alcoa, et al., was filed on behalf of plaintiffs
previously dismissed in the federal court proceedings
involving the original litigation over Hurricane Georges
impacts. The matter was originally filed in the Superior Court
of the Virgin Islands, St. Croix Division, on 30 March 2011.

Alcoa and other defendants in the Abraham and Abednego
cases filed or renewed motions to dismiss each case in
March 2012 and August 2012 following service of the
Abraham complaint on Alcoa and remand of the Abednego
compalint to Superior Court, respectively. By order dated 10
August 2015, the Superior Court dismissed plaintiffs’
complaints without prejudice to re-file the complaints
individually, rather than as a multi-plaintiff filing. The order
also preserves the defendants’ grounds for dismissal if new,
individual complaints are filed.

On 5 June 2015, AWA and SCA filed a complaint in Delaware
Chancery Court for a declatory judgment and injunctive relief
to resolve a dispute between Alcoa and Glencore Ltd.
(Glencore). The dispute arose from Glencore’s demand that
Alcoa indemnify it for liabilities it may have to pay to
Lockheed Martin (Lockheed) related to the St. Croix alumina
refinery. Lockheed had earlier filed suit against Glencore in
federal court in New York seeking indemnity for liabilities it
had incurred and would incur to the U.S. Virgin Islands to
remediate certain properties at the refinery and claimed that
Glencore was required by an earlier, 1989 purchase
agreement to indemnify it. Glencore had demanded that
Alcoa indemnify and defend it in the Lockheed case and
threatened to claim against Alcoa in the New York action

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

2. INVESTMENTS IN ASSOCIATES (continued)

despite exclusive jurisdiction for resolution of disputes
under the 1995 purchase agreement being in Delaware.
After Glencore conceded that it was not seeking to add
Alcoa to the New York action, AWA and SCA dismissed their
complaint in the Chancery Court case and on 6 August 2015,
filed a complaint for declaratory judgment in Delaware
Superior Court. AWA and SCA filed a motion for judgment on
the pleadings on 16 September 2015. Glencore answered
AWA’s and SCA’s complaint and asserted counterclaims on
27 August 2015, and on 2 October 2015, filed its own motion
for judgment on the pleadings. Argument on the parties’
motions was held by the court on 7 December 2015, and by
order dated 8 February 2016, Alcoa’s motion was granted
and Glencore’s motion was denied resulting in Alcoa not
being liable to indemnify Glencore for the Lockheed action.
On 17 February 2016, Glencore filed notice of its application
for interlocutory appeal of the 8 February 2016 ruling. At this
time Alumina Limted is unable to reasonably predict an
outcome for the remaining claims.

Other claims
There are potential obligations that may result in a future
obligation due to the various lawsuits and claims and
proceedings which have been, or may be, instituted or
asserted against entities within AWAC, including those
pertaining to environmental, product liability, safety and
health and tax matters. While the amounts claimed may be
substantial, the ultimate liability cannot now be determined
because of the considerable uncertainties that existed at

balance date. Also, not every plaintiff has specified the
amount of damages sought in their complaint. Therefore, it is
possible that results of operations or liquidity in a particular
period could be materially affected by certain contingencies.
Pursuant to the terms of the AWAC Formation Agreement,
Alcoa Inc and Alumina Limited have agreed to remain liable
for Extraordinary Liabilities (as defined in the agreement) as
well as for certain other pre-formation liabilities, such as
existing environmental conditions, to the extent of their
pre-formation ownership of the AWAC’s entity or asset with
which the liability is associated.

3. INVESTMENTS IN CONTROLLED ENTITIES

The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Alumina Limited
as at 31 December 2015 and the results of their operations
for the year then ended.

The Group has formed a trust to administer the Group’s
employee share scheme. This trust is consolidated, as the
substance of the relationship is that the trust is controlled
by the Group. Shares held by the Alumina Employee Share
Plan Trust are disclosed as treasury shares and deducted
from contributed equity.

The Group’s subsidiaries at 31 December 2015 are set
out below.

NAME

NOTES

PLACE OF INCORPORATION

Alumina Employee Share Plan Pty Ltd

Alumina Finance Pty Ltd.

Alumina Holdings (USA) Inc.

Alumina International Holdings Pty. Ltd.

Alumina Brazil Holdings Pty Ltd

Alumina Limited Do Brasil SA

Alumina (U.S.A.) Inc.

Butia Participaçoes SA

Westminer Acquisition (U.K.) Limited

VIC, Australia

Delaware, USA

VIC, Australia

VIC, Australia
Brazil
Delaware, USA

Brazil

PERCENTAGE
OWNERSHIP

2015

2014

100

A. A small proprietary company, which is not required to prepare a financial report.
B. A company that has not prepared audited accounts as they are non-operating or audited accounts are not required in their country of incorporation.

Appropriate books and records are maintained for these entities.

C. The company has been granted a relief from the necessity to prepare accounts pursuant to Australian Securities and Investment Commission (ASIC)

Class Order 98/1418. For further information refer Note 17.

D. A company that prepares separate audited accounts in the country of incorporation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

FINANCIAL AND CAPITAL RISK

4. FINANCIAL ASSETS AND LIABILITIES

This note provides information about the Group’s financial instruments, including:

• an overview of all financial instruments held by the Group.

• specific information about each type of financial instrument.

• accounting policies.

• information about determining the fair value of the instruments.

The Group holds the following financial instruments:

2015

Cash and cash equivalents – Note 4(a)

Receivables

Total financial assets

Payables

Borrowings – Note 4(b)

Derivative financial instruments – Note 4(c)

Total financial liabilities

Net financial liabilities

2014

Cash and cash equivalents – Note 4(a)

Receivables

Total financial assets

Payables

Borrowings – Note 4(b)

Derivative financial instruments – Note 4(c)

Total financial liabilities

Net financial liabilities

AT FAIR
VALUE
THROUGH
PROFIT
OR LOSS

AT
AMORTISED
COSTS

TOTAL

US$ MILLION US$ MILLION US$ MILLION

–

14.7

9.3

–

9.3

1.7

110.5

–

112.2

102.9

9.3

–

9.3

1.7

110.5

14.7

126.9

117.6

AT FAIR
VALUE
THROUGH
PROFIT
OR LOSS

AT
AMORTISED
COSTS

TOTAL

US$ MILLION US$ MILLION US$ MILLION

–

4.1

24.9

0.2

25.1

1.9

111.5

–

113.4

88.3

24.9

0.2

25.1

1.9

111.5

4.1

117.5

92.4

The Group’s exposure to various risks associated with the financial instruments is discussed in Note 5. The maximum
exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets
mentioned above. The carrying amounts of financial assets and liabilities, other than derivative financial instruments,
approximate their fair values. Derivative financial instruments are measured at fair value through profit or loss.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

4. FINANCIAL ASSETS AND LIABILITIES (continued)

(a) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits held at call with financial institutions, other short-term highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and bank overdrafts.

Cash on hand and at bank

Money market deposits

Total cash and cash equivalents as per the Statement of Cash Flows

US$ MILLION

2015

1.8

7.5

9.3

2014

2.4

22.5

24.9

(b) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on establishment of loan facilities are recognised as transaction costs to the extent that it is probable that
some or all of a facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there
is no evidence that it is probable that some or all of a facility will be drawn down, the fee is capitalised as a prepayment
for the liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.

Bank loans

Fixed rate note

Total borrowings

Bank loans

US$ MILLION

2015

20.0

90.5

110.5

2014

10.0

101.5

111.5

Alumina Limited has a $300 million syndicated bank facility with two equal tranches maturing in December 2017 and July
2020. As at 31 December 2015 there was $20 million drawn against the syndicated facility, so the undrawn available facility
amount as at 31 December 2015 was $280 million ( 2014: $10 million was drawn with the remaining undrawn facility of $290
million).

Fixed rate note

On 12 November 2014, Alumina Limited issued an A$125 million face value 5.5% fixed rate note at a discount of A$0.7
million. The note matures on 19 November 2019. The fixed rate note has been converted to US dollar equivalents at year end
exchange rates.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

4. FINANCIAL ASSETS AND LIABILITIES (continued)

Derivatives are only used for economic hedging purposes
and not as trading or speculative instruments. Derivatives
are classified as held for trading and accounted for at fair
value through profit or loss as they are not designated as
hedges. They are presented as current assets or liabilities
if they are expected to be settled within 12 month after the
end of the reporting period.

To provide an indication about the reliability of the input
used in determining the fair value, the Group has classified
its financial instruments into the three levels prescribed
under the accounting standards. An explanation of each
level follows underneath the table.

2015

Cross-currency interest rate swap (CCIRS AUD/USD)

Total financial liabilities at fair value through profit or loss

2014

Cross-currency interest rate swap (CCIRS AUD/USD)

Total financial liabilities at fair value through profit or loss

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION

–

14.7

4.1

–

14.7

4.1

Level 1: Financial instruments traded in active markets (such as publicly traded derivatives, trading and available for
sale securities) for which the fair value is based on quoted market prices at the end of the reporting period.

Level 2: Financial instruments that are not traded in an active market (for example, over the counter derivatives) for
which the fair value is determined using valuation techniques which maximise the use of observable market data and
rely as little as possible on entity specific estimates.

Level 3: If one or more of the significant inputs is not observable market data, the instrument is included in level 3.
This is the case for unlisted equity securities.

5. FINANCIAL RISK MANAGEMENT

This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial
performance.

RISK

EXPOSURE ARISING FROM

MEASUREMENT

MANAGEMENT

Market risk: foreign currency

Market risk: interest rate

Credit risk

Liquidity risk

Financial assets and liabilities
denominated in currency
other than US$

Long-term borrowings at
fixed rates

Cash and cash equivalent,
and derivative financial
instruments

Borrowings and other
liabilities

Cash flow forecasting &
sensitivity analysis

Cross-currency interest rate
swaps

Sensitivity analysis

Credit ratings

Cross-currency interest rate
swaps

Credit limits, letters of credit,
approved counterparties list

Cash flow forecasting

Availability of committed
borrowing facilities

Financial risk management is carried out by the Treasury Committee which is responsible for developing and monitoring
risk management policies. Risk management policies are established to identify and analyse the risks faced by the Group
to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

7 7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

5. FINANCIAL RISK MANAGEMENT (continued)
(a) Market risk

Foreign exchange risk

Foreign exchange risk for the Group arises when future
commercial transactions and recognised assets and
liabilities are denominated in a currency that is not the
Group’s functional currency.

On 12 November 2014 Alumina Limited issued an A$125
million face value 5.5% fixed rate note at a discount of
A$0.7 million. The note is issued in Australian dollars. To
mitigate the exposure to the AUD/USD exchange rate and

Australian interest rates the Group entered into CCIRS for
the full amount of the face value of the fixed rate note to
swap the exposure back to US dollars.

Except as described above, the Group generally does not
hedge its foreign currency exposures except through the
near-term purchase of currency to meet operating
requirements. The change to USD functional currency in
January 2010 removed the foreign exchange risk on USD
borrowings and USD denominated assets.

The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in US$, was as follows:

2015

Cash and cash equivalents

Receivables

Total financial assets

Payables

Borrowings

Total non-derivative financial liabilities

Net non-derivative financial (liabilities)/assets

Derivative financial instruments (notional principal)

Net financial assets/(liabilities)

2014

Cash and cash equivalents

Receivables

Total financial assets

Payables

Borrowings

Total non-derivative financial liabilities

Net non-derivative financial assets/(liabilities)

Derivative financial instruments (notional principal)

Net financial assets/(liabilities)

USD

AUD

OTHER

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION

8.1

–

8.1

–

20.0

(11.9)

(108.4)

(120.3)

1.0

–

1.0

1.7

90.5

92.2

(91.2)

108.4

17.2

0.2

–

0.2

–

0.2

–

0.2

9.3

–

9.3

1.7

110.5

112.2

(102.9)

–

(102.9)

USD

AUD

OTHER

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION

23.8

–

23.8

–

10.0

13.8

(108.4)

(94.6)

0.8

0.2

1.0

1.8

101.5

103.3

(102.3)

108.4

6.1

0.3

–

0.3

0.1

–

0.1

0.2

–

0.2

24.9

0.2

25.1

1.9

111.5

113.4

(88.3)

–

(88.3)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

5. FINANCIAL RISK MANAGEMENT (continued)

Cash flow and fair value interest rate risk

The Group’s main interest rate risk arises from its
borrowings.

Borrowings by the Group at variable rates expose it to
cash flow interest rate risk. Borrowings at fixed rates
would expose the Group to fair value interest rate risk.
When managing interest rate risk the Group seeks to
reduce the overall cost of funds. Group policy is to
generally borrow at floating rates subject to availability
of attractive fixed rate deals.

2015

Cash and cash equivalents

Receivables

Total financial assets

Payables

Borrowings

Total non-derivative financial liabilities

Net non-derivative financial liabilities

Weighted average interest rate before derivatives

Weighted average interest rate after derivatives

2014

Cash and cash equivalents

Receivables

Total financial assets

Payables

Borrowings

Total non-derivative financial liabilities

Net non-derivative financial assets/(liabilities)

Weighted average interest rate before derivatives

Weighted average interest rate after derivatives

In 2015 and 2014, CCIRS for the whole face value of the
fixed rate note were used to manage the exposure to
Australian interest rates over the life of the note.

The consolidated entity’s exposure to interest rate risk
and the effective weighted interest rate after the effect
of derivative instruments is set out below:

FLOATING
INTEREST

FIXED
INTEREST

NON-
INTEREST
BEARING

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION

9.3

–

9.3

–

20.0

10.7

1.6%

–

90.5

5.5%

3.1%

–

1.7

–

1.7

9.3

–

9.3

1.7

110.5

112.2

102.9

FLOATING
INTEREST

FIXED
INTEREST

NON-
INTEREST
BEARING

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION

24.9

–

24.9

–

10.0

14.9

1.9%

–

101.5

(101.5)

5.5%

3.1%

–

0.2

1.9

–

1.9

(1.7)

24.9

0.2

25.1

1.9

111.5

113.4

(88.3)

Had interest rates on floating rate debt during 2015 been one percentage point higher/lower than the average, with all
other variables held constant, pre-tax profit for the year would have been US$0.7 million lower/higher (2014: US$1.4
million lower/higher).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

5. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk

Credit risk arises from cash and cash equivalents, derivative
financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers,
including outstanding receivables and committed
transactions. For banks and financial institutions, only
independently rated parties with a minimum rating of ‘A–’
are accepted, and exposure limits are assigned based on
actual independent rating and Board approved guidelines.

Credit risk further arises in relation to cross guarantees
given to wholly owned subsidiaries (see Note 17 for details).
Such guarantees are only provided in exceptional
circumstances and are subject to Board approval.

The carrying amount of financial assets recorded in the
financial statements, net of any allowances for losses,
represents the Group’s maximum exposure to credit risk.

Prudent liquidity risk management requires maintaining
sufficient cash and credit facilities to ensure the Group’s
commitments and plans can be met. This is managed by
maintaining committed undrawn credit facilities to cover
reasonably expected forward cash requirements.
Management monitors rolling forecasts of the Group’s
liquidity, including undrawn borrowing facilities and cash
and cash equivalents on the basis of expected cash flows.

The Group had the following undrawn borrowing facilities at the end of the reporting period:

Expiring within one year

Expiring beyond one year

Total undrawn borrowing facilities

US$ MILLION

2015

–

280.0

2014

150.0

140.0

290.0

In June 2015 the original two year tranche of the $300 million syndicated facility was repriced and extended until July
2020.

The table below details the Group’s remaining contractual maturity for its non-derivative financial liabilities.

2015

Trade payables

Borrowings

Total financial non-derivative liabilities

2014

Trade payables

Borrowings

Total financial non-derivative liabilities

LESS THAN
6 MONTHS

6 –12
MONTHS

1–2
YEARS

2– 5
YEARS

TOTAL

US$ MILLION US$ MILLION US$ MILLION US$ MILLION US$ MILLION

1.7

–

1.7

1.9

–

1.9

–

20.0

–

90.5

–

111.5

1.7

110.5

112.2

1.9

111.5

113.4

8 0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

6. CAPITAL MANAGEMENT
(a) Risk management

The Group’s objectives when managing capital is to
safeguard the ability to continue as a going concern, so that it
can continue to provide returns for shareholders and to
maintain an optimal capital structure to reduce the cost of
capital.

The Board’s policy is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to
sustain future development of the business. In order to

maintain or adjust the capital structure, the Company may
adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to
reduce debt.

The Group calculates the gearing ratio as net debt divided by
total capital. Net debt is calculated as total borrowings less
cash and cash equivalents. Total capital is calculated as
‘equity’ as shown in the balance sheet plus debt.

The gearing ratios at 31 December 2015 and 31 December 2014 were as follows:

Total borrowings

Less: cash and cash equivalents

Net debt

Total borrowings

Total equity

Total capital

Gearing ratio

(b) Dividends

Interim dividend of US4.5 cents fully franked at 30% per fully paid share declared 19 August 2015
and paid on 28 September 2015 (2014: No interim dividend was paid).

Final dividend of US1.6 cents fully franked at 30% per fully paid share declared 26 February 2015
and paid on 25 March 2015 (2013: No final dividend was paid).

Total dividends

US$ MILLION

2015

110.5

(9.3)

101.2

110.5

1,982.9

2,093.4

4.8%

2014

111.5

(24.9)

86.6

111.5

2,424.0

2,535.5

3.4%

US$ MILLION

2015

126.3

44.9

171.2

2014

–

Since the year end the Directors have recommended the payment of a final dividend of US1.8 cent per share (2014: US1.6
cents per share), fully franked based on the tax paid at 30%. Record date to determine entitlements to the dividend is 3
March 2016. The aggregate amount of the proposed dividend expected to be paid on 23 March 2016 out of retained
earnings at 31 December 2015, but not recognised as a liability at the year end, is $51.8 million.

Franking credits available for subsequent financial years, based on a tax rate of 30% (2014: 30%)

A$ MILLION

2015

339.9

2014

409.1

The above amounts are calculated from the balance of the franking credits as at the end of the reporting period, adjusted
for franking credits and debits that will arise from the settlement of liabilities and receivables for income tax and dividends
after the end of the year.

The fully franked dividends received from AWAC in the financial year were

US$ MILLION

2015

56.2

2014

–

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

KEY NUMBERS

7. EXPENSES
(a) Employee benefits expense

Liabilities for salaries and annual leave are recognised in
current provisions (i.e. short-term employee benefits), and
are measured as the amount unpaid at reporting date at
expected pay rates in respect of employees’ services up
to that date, including related on-costs.

The liability for long service leave is recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be made
in respect of services provided by employees up to the
reporting date. Consideration is given to expected
future wage and salary levels, experience of employee
departures and periods of service. Expected future
payments are discounted using market yields at the
reporting date on national government bonds with
terms to maturity and currency that match, as closely
as possible, the estimated future cash flows.

All employees of Alumina Limited are entitled to benefits
on retirement, disability or death from the Group’s
superannuation plan. Alumina employees are members
of an Alumina Limited Super Plan managed by MLC
MasterKey Super, except for employees who elected
to contribute to an alternate fund. The plan is an
accumulation category plan which offers a minimum
Company contribution (subject to certain cashing out
options and legislation) of 9.5 per cent of basic salary
to each member’s account. Members also have the
option to make voluntary contributions to their account.
Employer contributions to these funds are recognised
as an expense.

Profit/(loss) before income tax included the following specific expenses:

Defined contribution superannuation expense

Other employee benefits expense

Total employee benefits expense

(b) Finance costs

US$ MILLION

2015

2014

0.2

4.9

5.1

0.2

4.6

4.8

Finance costs comprise interest payable on borrowings using the effective interest rate method, commitment fees and
amortisation of capitalised facility fees.

Finance costs:

Interest expense

Commitment and upfront fees

Amortisation of capitalised upfront fees

Bank charges

Total finance costs

US$ MILLION

2015

2014

3.6

2.1

0.8

0.1

6.6

10.1

2.6

0.8

0.1

13.6

8 2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

8. INCOME TAX EXPENSE
(a) Income tax expense and deferred taxes

The income tax expense/benefit for the period is the tax
payable/receivable on the current period’s taxable income
based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to
unused tax losses.

Current tax

Deferred tax

Aggregate income tax expense

The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the
reporting period in the countries where the Company’s
subsidiaries and associates operate and generate taxable
income.

US$ MILLION

2015

–

2014

0.8

–

0.8

Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the consolidated financial statements. Deferred income tax
is determined using tax rates (and laws) that have been
enacted or substantially enacted by the reporting date and
are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is
settled.

Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and
tax bases of investments in controlled entities where the

parent entity is able to control the timing of the reversal
of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and liabilities
are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.

Alumina Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation.
As a consequence, these entities are taxed as a single
entity and the deferred tax assets and liabilities of these
entities are set off in the consolidated financial statements.

The Group’s deferred tax assets and liabilities are attributable to the following:

Deferred tax liabilities

Unrealised foreign exchange gains

Total deferred tax liabilities

Deferred tax assets

Employee benefits

Derivative financial instruments

Accrued liabilities

Transaction costs

Total deferred tax assets other than tax losses

Net deferred tax assets before tax losses

Deductible temporary differences and tax losses not recognised

Net deferred tax assets

US$ MILLION

2015

2014

3.4

0.2

3.2

–

0.3

3.7

0.3

(0.3)

–

2.0

0.2

1.2

0.4

0.3

2.1

0.1

(0.1)

–

Deferred tax assets are recognised only to the extent of deferred tax liabilities existing at reporting date. Remaining deferred
tax assets are not recognised as it is not probable that future taxable amounts will be available to utilise those temporary
differences and losses.

8 3

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

8. INCOME TAX EXPENSE (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit/(loss) before income tax

Prima facie tax (expense)/benefit for the period at the rate of 30%

The following items caused the total charge for income tax to vary from the above:

Share of equity accounted (profit)/loss not assessable for tax

Foreign income subject to accruals tax

Share of Partnership income assessable for tax

Timing differences not recognised

Tax losses not recognised

Amounts non-assessable for tax

Non-deductible expenses

Net movement

Consequent increase in charge for income tax

Estimated tax expense in relation to allocation agreement

Aggregate income tax expense

US$ MILLION

2015

88.3

(26.5)

(109.9)

1.8

1.5

(1.4)

17.8

–

1.9

(88.3)

26.5

–

2014

(97.5)

29.2

73.6

0.6

4.3

–

21.3

(1.5)

1.7

100.0

(30.0)

(0.8)

Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income and equity
are also recognised directly in other comprehensive income and equity.

US$ MILLION

2015

(0.3)

15.2

14.9

2014

(0.3)

(23.0)

(23.3)

US$ MILLION

2015

912.2

951.5

2014

905.7

951.5

1,863.7

1,857.2

298.8

285.4

584.2

297.1

285.4

582.5

Cash flow hedges

Actuarial gains/(losses) on retirement benefit obligations

Total tax expense/(benefit) relating to items of other comprehensive income

(d) Tax losses

Tax losses – revenue

Tax losses – capital

Total unused tax losses

Potential tax benefit – revenue

Potential tax benefit – capital

Total potential tax benefit

8 4

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

9. EQUITY
(a) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown
in equity as a deduction, net of tax, from the proceeds.

In April 2015 the directors approved reccomencement of the Company’s Dividend Reinvestment Plan (DRP). DRP
was applicable for the Company’s interim dividend, resulting in 73,617,883 shares issued in September 2015 at a
1.5% discount to the market price. DRP was later suspended and will not apply to the 2015 final dividend.

MOVEMENT IN SHARE CAPITAL

NUMBER OF SHARES

US$ MILLION

Balance brought forward

Movement for the period

Total issued capital

2015

2014

2015

2014

2,806,225,615

2,620.0

73,617,883

–

62.9

–

2,879,843,498

2,806,225,615

2,682.9

2,620.0

Treasury shares
Treasury shares are Alumina Limited shares held by the Alumina Employee Share Plan Trust for the purposes of issuing
shares under the Alumina Employee Share Plan.

MOVEMENT IN TREASURY SHARES

NUMBER OF SHARES

US$

Balance brought forward

Acquisition of shares by Alumina Employee Share Plan Pty Ltd
(average price: $1.78 per share)

Employee performance rights vested

Total treasury shares

2015

423,695

600,000

(961,978)

61,717

2014

2015

2014

499,314

1,176,904

1,312,156

–

827,340

–

(75,619)

(590,638)

(135,252)

423,695

1,413,606

1,176,904

Weighted average number of ordinary shares used as the denominator in the calculation of basic earnings per share
calculated as weighted average number of ordinary shares outstanding during the financial year, adjusted for treasury
shares issued.

Weighted average number of ordinary shares used as the denominator in the calculation of basic
earnings per share

2,824,328,800 2,805,745,467

NUMBER OF SHARES

2015

2014

(b) Retained earnings
Movement in retained earnings were as follows:

Retained earnings at the beginning of the financial year

Profit/(loss) attributable to the owners of Alumina Limited

Dividends provided for or paid

Re-measurements of retirement benefit obligations accounted for using the equity method

Total retained earnings at the end of the financial year

US$ MILLION

2015

658.2

88.3

(171.2)

32.0

607.3

2014

803.1

(98.3)

–

(46.6)

658.2

8 5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

9. EQUITY (continued)
(c) Other reserves

The following table shows a breakdown of the balance sheet line item “reserves”. A description of the nature and purpose
of each reserve as well as the movement in these reserves during the year is provided below.

Asset revaluation reserve

Capital reserve

Foreign currency translation reserve

Option premium on convertible bonds

Share-based payments reserve

Cash-flow hedge reserve

Total Reserves

Asset revaluation reserve

US$ MILLION

2015

30.8

12.5

2014

30.8

12.5

(1,370.7)

(918.5)

18.6

6.3

(3.4)

18.6

6.3

(2.7)

(1,305.9)

(853.0)

The balance standing to the credit of the reserve may be used to satisfy the distribution of bonus shares and is only
available for the payment of cash dividends in limited circumstances as permitted by law.

Capital reserve

The reserve records dividends arising from share of profits on sale of investments.

Foreign currency translation reserve

The foreign currency translation reserve represents exchange differences arising on the translation of non-US dollar
functional currency operations within the Group into US dollars.

Balance at the beginning of the financial year

Currency translation differences arising during the year

Balance at the end of the financial year

Option premium on convertible bonds

US$ MILLION

2015

(918.5)

(452.2)

(1,370.7)

2014

(693.9)

(224.6)

(918.5)

The convertible bond was accounted for as a compound instrument at the Group level. The option premium represented
the equity component (conversion rights) of the convertible bond. The convertible bond was fully redeemed in 2011.

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of performance rights issued but not exercised. For
further details refer to Note 12.

Cash-flow hedge reserve

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The year end balance and movements within the cash-flow hedge reserve of
AWAC is accounted for via the equity accounting method.

8 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

10. CASH FLOW INFORMATION
(a) Reconciliation of (loss)/profit after income tax to net cash (outflow)/inflow from operating activities

Profit/(loss) from continuing operations after income tax

Allocation of Alba settlement

Share of net (profit)/loss of associates accounted for using equity method

Dividends and distributions received from associates

Share based payments

Other non-cash items ( depreciation, net exchange differences, other)

Sub total

Change in assets and liabilities

Decrease/(increase) in receivables

Decrease/(increase) in other assets

(Decrease)/increase in payables

(Decrease)/increase in current tax liability

Net cash inflow/(outflow) from operating activities

(b) Non-cash financing and investing activities

US$ MILLION

2015

88.3

–

(109.9)

62.9

0.8

2.1

44.2

0.2

(0.2)

(0.8)

43.6

2014

(98.3)

(1.5)

73.6

20.3

0.6

(1.2)

(6.5)

(0.1)

0.2

(2.0)

0.8

(7.6)

In September 2015, 73,617,883 shares in Alumina Limited, valued at $62.9 million were issued to shareholders who
elected to participate in the dividend reinvestment plan which was applicable to the interim dividend for 2015.

During 2014 it was resolved that $138.6 million in relation to Alba settlement allocation adjustment will be recovered
through Alcoa World Alumina LLC equity allocations to Alumina Limited, funded by Alcoa Inc. For further details refer
to Note 2(d).

OTHER INFORMATION

11. RELATED PARTY TRANSACTIONS

The parent entity within the Group is Alumina Limited.
Balances and transactions between the parent entity and
its subsidiaries have been eliminated on consolidation and
are not disclosed in this note.

(a) Ownership interests in related parties

Interests held in the following classes of related parties are
set out in the following notes:

• associates – Note 2.

• controlled entities – Note 3.

DIRECTORS AND SENIOR EXECUTIVES

Short-term employee benefits

Post-employment benefits

Share based payments

Total

(b) Compensation of key management personnel

Detailed remuneration disclosures for the key management
personnel, defined as Group’s Directors, CEO and Senior
Executives, are provided in the remuneration report on
pages 34 to 62 of this annual report.

The remuneration report has been prepared in Australian
dollars, whilst the financial report has been prepared in US
dollars. The average exchange rate for 2015 of 0.7519
(2014: 0.9021) has been used for conversion.

US$

2015

2014

3,706,166

4,348,296

135,385

677,580

152,033

572,773

4,519,131

5,073,102

There have been no other related party transactions made during the period or balances outstanding as at 31 December
2015, between the Group, its related parties, the directors or key management personnel (2014: Nil).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

12. SHARE-BASED PAYMENTS

The Group provides benefits to employees (including CEO
and Senior Executives) through share based incentives.
Employees are incentivised for their performance in part
through participation in the grant of conditional entitlement
to fully paid ordinary shares (a Performance Right) via
the Alumina Limited Employee Share Plan (ESP).

For further details on key features of the ESP refer to
the remuneration report on pages 46 to 54 of this
annual report.

Set out below are summaries of performance rights
granted under the ESP:

2015

Grant Date

Expiry Date

11/12/2014

7/12/2015

6/12/2016

11/12/2017

9/3/2012

8/2/2013

10/2/2014

5/1/2015

Total

2014

Grant Date

Expiry Date

18/2/2011

9/3/2012

8/2/2013

10/2/2014

Total

6/12/2013

11/12/2014

7/12/2015

6/12/2016

Balance at
start of the
year
Number

666,040

1,354,880

1,113,350

–

3,134,270

Balance at
start of the
year
Number

153,500

666,040

1,378,780

Granted
during the
year
Number

Vested
during the
year
Number

Lapsed
during the
year
Number

Balance at
end of the
year
Number

–

695,810

(297,646)

(368,394)

–

(664,332)

–

(2,780)

(2,580)

(1,560)

687,768

1,110,770

694,250

(961,978)

(375,314)

2,492,788

Granted
during the
year
Number

Vested
during the
year
Number

Lapsed
during the
year
Number

Balance at
end of the
year
Number

–

(75,619)

(77,881)

–

666,040

(23,900)

1,354,880

(22,100)

1,113,350

–

1,135,450

2,198,320

1,135,450

(75,619)

(123,881)

3,134,270

The weighted average remaining contractual life of
performance rights outstanding at the end of the period
was 2.0 years (2014: 2.1 years).

In addition to the ESP, the CEO’s fixed remuneration
includes an annual share right component. This share
based component of the CEO’s fixed remuneration is
conditional on a minimum of 18 months service and
deferred for three years from the date of the grant.

For further details refer to the remuneration report
on page 40 of this annual report.

Total expenses arising from share-based payment
transactions recognised during the period as part of
employee benefit expense were as follows:

Performance rights granted under the Alumina Employee Share Plan

CEO annual conditional share rights grant

Total

US$ 000’s

2015

607

160

767

2014

544

110

654

8 8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

13. REMUNERATION OF AUDITORS

During the period the following fees were paid or payable for services provided by the auditor of the parent entity, and its
related practices and non-related audit firms:

PricewaterhouseCoopers Australia:

Audit and review of the financial reports

Other assurance services

Related practices of PricewaterhouseCoopers Australia:

Audit and review of the financial reports

Overseas taxation services

Total

US$ 000’s

2015

2014

355

428

497

–

513

It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers’ expertise and experience with the Group are important provided such arrangements do not
compromise audit independence. These assignments are principally tax advice or where PricewaterhouseCoopers is
awarded assignments on a competitive basis.

14. COMMITMENTS AND CONTINGENCIES
Capital commitments
There are no contractual capital commitments at reporting
date but there could be future equity calls by AWAC
entities in relation to working capital support. However, this
is subject to market conditions.

Contingent liabilities
There are no contingent liabilities of the Group as at
31 December 2015 and 31 December 2014, other than
as disclosed in Note 2(e) and Note 16.

15. EVENTS OCCURRING AFTER THE REPORTING
PERIOD

Except as disclosed in the Director’s report or elsewhere
in the Financial Statements, there have been no significant
events occurring since 31 December 2015.

16. PARENT ENTITY FINANCIAL INFORMATION

The financial information for the parent entity has been
prepared on the same basis as the consolidated financial
statements, except as set out below.

Investments in subsidiaries, associates and joint venture
entities
Investments in subsidiaries, associates and joint venture
entities are accounted for at cost in the financial
statements of Alumina Limited. Dividends received from
associates are recognised in the parent entity’s profit or
loss, rather than being deducted from the carrying amount
of these investments.

Where the parent entity has provided financial guarantees
in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are
accounted for as contributions and recognised as part
of the cost of the investment.

Intercompany Loans
Loans granted by the parent entity to its subsidiaries are
classified as non-current assets.

Tax consolidation legislation
Alumina Limited and its wholly-owned Australian controlled
entities have implemented tax consolidation legislation.
The head entity, Alumina Limited, and the controlled
entities in the tax consolidated Group account for their
own current and deferred tax amounts. These tax amounts
are measured as if each entity in the tax consolidated
Group continues to be a standalone taxpayer in its own
right. In addition to its own current and deferred tax
amounts, Alumina Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated Group.

8 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

16. PARENT ENTITY FINANCIAL INFORMATION (continued)
(a) Summarised financial information

The individual financial statements for the parent entity show the following aggregated amounts:

BALANCE SHEET

Current assets

Total assets

Current liabilities

Total liabilities

SHAREHOLDERS’ EQUITY

Issued capital

Reserves

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

Profit/(loss) for the year

Total comprehensive income/(loss) for the year

(b) Guarantees entered into by the parent entity

The parent entity has provided guarantees to certain
third parties in relation to the performance of contracts
by various AWAC companies.

In order to facilitate the full conversion of the San Ciprian
alumina refinery from fuel oil to natural gas, in October
2013, Alumina Española SA (Espanola) signed a take or
pay gas pipeline utilization agreement. In November 2013,
Alumina Limited agreed to proportionally (i.e. 40%)
guarantee the payment of Espanola’s contracted gas
pipeline utilization over the four years of the commitment
period. Such commitment came into force six months
after the gas pipeline was put into operation. The gas
pipeline was completed in January 2015 and the refinery
has switched to natural gas consumption for 100% of
its needs.

Three supply contracts were signed in 2014 for the supply
of natural gas to the San Ciprián refinery for the 2015
period and further extended for the 2016 period. Alumina
Limited agreed to proportionally guarantee the payment
of Espanola’s obligations under those contracts.

There is also a guarantee to Banco di Bilbao in respect
of Espanola’s bank facility.

A guarantee in relation to a Suriname mining contract
and a letter of credit to Honeywell Manageability Leasing
Company in relation to lease payments for the Honeywell
operating system were cancelled in January 2016.

US$ MILLION

2015

2014

13.4

3,867.5

1.9

133.0

28.5

3,928.1

2.1

123.4

2,682.9

2,620.0

239.3

812.3

239.3

945.4

3,734.5

3,804.7

38.1

(10.5)

In late 2011, Alcoa Inc, on behalf of AWAC, issued
guarantees to the lenders of the Ma’aden bauxite mining/
refining joint venture in Saudi Arabia. Alcoa Inc’s
guarantees for the Ma’aden Bauxite and Alumina Company
cover total debt service requirements through 2019 and
2024. In the event Alcoa Inc would be required to make
payments under the guarantees, 40% of such amount
would be contributed by Alumina Limited.

In addition, the parent entity has entered into a Deed of
Cross Guarantee with the effect that it guarantees the
debts of its wholly-owned subsidiaries. Further details of
the Deed of Cross Guarantee are disclosed in Note 17.

No liability was recognised by the parent entity or the
group in relation to the abovementioned guarantees,
as the fair value of the guarantees are immaterial.

The parent entity did not have any contingent liabilities
as at 31 December 2015 or 31 December 2014. For
information about guarantees given by the parent
entity refer above.

(d) Contractual commitments for the acquisition

of property, plant and equipment

There are no contractual commitments by the parent entity
for the acquisition of property, plant and equipment at
reporting date.

9 0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

17. DEED OF CROSS GUARANTEE

Alumina Limited and Alumina International Holdings Pty. Ltd. are parties to the cross guarantee under which each of
these companies guarantees the debts of the other. By entering into the deed, wholly-owned entities have been relieved
from the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued
by the Australian Securities and Investments Commission.

The above companies represent a “closed group” as defined in the Class Order, and as there are no other parties to
the deed of cross guarantee that are controlled by Alumina Limited, they also represent the “extended closed group”.

(a) Consolidated statement of profit or loss and other comprehensive income and summary movements in

consolidated retained earnings

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Dividends and distributions

Other income

General and administrative expenses

Change in fair value of derivatives/foreign exchange losses

Finance costs

Profit from ordinary activities before income tax

Income tax expense

Net profit for the year

Other comprehensive income net of tax

Total comprehensive income for the year

MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS

Retained profits at the beginning of the financial year

Net profit for the year

Dividend provided for or paid

Retained profits at the end of the financial year

US$ MILLION

2015

62.9

(11.5)

(1.4)

(6.7)

43.3

–

43.3

–

43.3

2015

807.6

43.3

(171.2)

679.7

2014

20.3

100.3

(12.7)

2.5

(7.0)

103.4

–

103.4

–

103.4

2014

704.2

103.4

–

807.6

US$ MILLION

2015

2014

9.1

71.3

2.8

83.2

1,672.4

1,979.2

0.1

3,651.7

3,734.9

1.7

0.2

1.9

115.8

14.7

0.5

131.0

132.9

23.8

75.4

3.1

102.3

1,681.5

2,006.7

0.1

3,688.3

3,790.6

1.9

0.3

2.2

116.8

4.1

0.5

121.4

123.6

3,602.0

3,667.0

2,682.9

2,620.0

239.4

679.7

239.4

807.6

3,602.0

3,667.0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

17. DEED OF CROSS GUARANTEE (continued)
(b) Consolidated balance sheet

Current assets

Cash and cash equivalents

Receivables

Other assets

Total current assets

Non-current assets

Investments in associates

Other financial assets

Property, plant and equipment

Total non-current assets

Total assets

Current liabilities

Payables

Provisions

Total current liabilities

Non-current liabilities

Borrowings

Derivative financial instruments

Provisions

Total non-current liabilities

Total liabilities

Net assets

Equity

Contributed equity

Reserves

Retained profits

Total equity

9 2

(b) AASB 15 Revenue from contracts with customer
(effective 1 January 2017).

The AASB has issued a new standard for the recognition
of revenue. AASB 15 Revenue from Contracts with
Customers replaces AASB 118 which covers contracts
for goods and services and AASB 111 which covers
construction contracts. The new standard is based on
the principle that revenue is recognised when control of a
good or a service transfers to a customer – so the notion
of control replaces the existing notion of risks and rewards.
The standard permits a modified retrospective approach
for the adoption. Under this approach entities will
recognise transitional adjustments to retained earnings on
the date of initial application (eg 1 January 2017), ie without
restating the comparative period. They will only need to
apply the new rules to contracts that are not completed
as of the date of initial application. The standard is not
applicable until 1 January 2017 but is available for early
adoption. The Group is yet to assess its full impact and
has not yet decided when to adopt AASB 15.

There are no other Standards that are not yet effective and
that are expected to have a material impact on the Group
in the current or future reporting periods and on
foreseeable future transactions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015

18. NEW ACCOUNTING STANDARDS AND
INTERPRETATIONS NOT YET ADOPTED

Certain new accounting standards and interpretations
have been published that are not mandatory for the 31
December 2015 reporting period and have not been early
adopted by the Group. The Group’s assessment of the
impact of these new standards and interpretations is
set out below:

(a) AASB 9 Financial Instruments (effective from
1 January 2018).
The most recent version of AASB 9 (issued in 2014) is the
final version of the standard and includes comprehensive
guidance on three areas of accounting for financial
instruments: classification and measurement, impairment
and hedging. AASB 9 (2014) is the only version available
for adoption for reporting periods beginning on or after
1 February 2015.

The Group has not yet decided when to adopt AASB9,
however does not expect the impact to be material.

AASB 16 Leases (effective from 1 January 2019)
The new standard will replace AASB 117 Leases. Once
effective, the new requirements will apply to new and
pre-existing lease arrangements. The key changes have
been outlined below:

• Lessees will recognise a lease liability reflecting future

lease payments and a ‘right-of-use asset’ for virtually all
lease contracts (optional exemption available for certain
short-term leases and leases of low-value assets).

• Lessees will have to present interest expense on the

lease liability and depreciation on the right-of-use asset
in their income statement.

• Lease payments that reflects interest on the lease

liability can be presented as an operating cash flow.
Cash payments for the principal portion of the lease
liability should be classified within financing activities.
Payments for short-term leases, for leases of low-value
assets could be presented within operating activities.

The Group is yet to assess the full impact of the new
standard and has not yet decided when to adopt AASB16
(early adoption permitted in conjunction with AABS 15
Revenue from Contracts with Customers).

9 3

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALUMINA LIMITED

DIRECTORS’ DECLARATION

In the directors’ opinion:

a) the financial statements and notes set out on pages 63 to 93 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional

reporting requirements; and

(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its

performance for the financial year ended on that date; and

b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable; and

c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
identified in Note 3 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue
of the deed of cross guarantee described in Note 17.

The financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.

The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporation Act 2001.

This declaration is made in accordance with a resolution of the Directors.

GJ Pizzey
Chairman
15 March 2016

9 4

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALUMINA LIMITED

Report on the financial report

We have audited the accompanying financial report of
Alumina Limited (the Company), which comprises the
consolidated balance sheet as at 31 December 2015,
the consolidated statement of profit or loss and other
comprehensive income , consolidated statement of
changes in equity and consolidated statement of cash
flows for the year ended on that date, a summary of
significant accounting policies, other explanatory notes
and the directors’ declaration for Alumina Limited
Group (the consolidated entity). The consolidated entity
comprises the company and the entities it controlled at
year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards
and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable
the preparation of the financial report that is free from
material misstatement, whether due to fraud or error.
In Note 1, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with
International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the
auditor’s judgement, including the assessment of the risks
of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the
consolidated entity’s preparation and fair presentation of
the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall
presentation of the financial report.

We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
audit opinion.

Independence

In conducting our audit, we have complied with the
independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

(a) the financial report of Alumina Limited is in accordance

with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated

entity’s financial position as at 31 December 2015
and of its performance for the year ended on that
date; and

ii) complying with Australian Accounting Standards

and the Corporations Regulations 2001.

(b) the financial report and notes also comply with
International Financial Reporting Standards as
disclosed in the notes to the consolidated financial
statements.

Report on the Remuneration Report

We have audited the remuneration report included in
pages 34 to 62 of the directors’ report for the year ended
31 December 2015. The directors of the company are
responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express
an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing
Standards.

Auditor’s opinion

In our opinion, the remuneration report of Alumina Limited
for the year ended 31 December 2015 complies with
section 300A of the Corporations Act 2001.

PRICEWATERHOUSECOOPERS

Nadia Carlin
Partner
Melbourne
15 March 2016

9 5

DETAILS OF SHAREHOLDINGS AND SHAREHOLDERS
LISTED SECURITIES – 29 FEBUARY 2016

Alumina Limited has 2,879,843,498 issued fully paid ordinary shares.

SIZE OF SHAREHOLDINGS AS AT 29 FEBRUARY 2016

RANGE

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 – 9,999,999,999

Total

TOTAL HOLDERS

UNITS

% OF ISSUED CAPITAL

20,103

22,213

7,346

8,084

480

58,226

9,343,020

55,203,125

54,063,444

207,739,839

2,553,494,070

2,879,843,498

0.32

1.92

1.88

7.21

88.67

100.00

Of these, 8,815 shareholders held less than a marketable parcel of $500 worth of shares (372) a total of 1,690,235 shares.
In accordance with ASX Business Rules, the last sale price on the Company’s shares on the ASX on 29 February 2016
was used to determine the number of shares in a marketable parcel.

NAME

HSBC CUSTODY NOMINEES (AUST)

J P MORGAN NOMINEES AUSTRALIA LIMITED

NATIONAL NOMINEES

CITIC RESOURCES AUSTRALIA PTY LTD

CITICORP NOMINEES PTY LTD

BESTBUY OVERSEAS CO LTD

BNP PARIBAS NOMS PTY LTD

RBC GLOBAL SERVICES AUSTRALIA

BNP PARIBAS NOMINEES PTY LTD

CITIC RESOURCES AUSTRALIA PTY LTD

BESTBUY OVERSEAS CO LTD

UBS NOMINEES PTY LTD

CITIC AUSTRALIA PTY LTD

CITICORP NOMINEES PTY LIMITED

UBS NOMINEES PTY LTD

AUSTRALIAN FOUNDATION RBC INVESTOR SERVICES AUSTRALIA

NOMINEES PTY LIMITED

ARGO INVESTMENTS LIMITED

BNP PARIBAS NOMS (NZ) LTD

MIRRABOOKA INVESTMENTS LIMITED

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)

Total Remaining Holders Balance

NO. OF FULLY PAID
ORDINARY SHARES

480,240,526

440,257,233

370,142,421

219,617,657

210,635,743

154,114,590

86,978,564

82,707,016

74,183,866

59,282,343

52,975,733

52,002,265

39,799,208

21,726,158

14,595,847

14,323,142

12,701,788

12,429,285

6,399,244

5,321,800

16.68

15.29

12.85

7.63

7.31

5.35

3.02

2.87

2.58

2.06

1.84

1.81

1.38

0.75

0.51

0.50

0.44

0.43

0.22

0.18

2,410,434,429

469,409,069

83.70

16.30

2,879,843,498 100.00

Each ordinary shareholder is entitled on a show of hands to vote and on a poll one vote for each share held.

The Company does not have a current on market buy-back of its shares. There are no restricted securities or
securities subject to voluntary escrow.

In 2015, 600,000 shares in Alumina Limited were purchased on market for the Alumina Employee Share Plan (LTI scheme)
at an average share price of $1.7749.

SUBSTANTIAL SHAREHOLDING AS AT 29 FEBRUARY 2016

SHAREHOLDING

CITIC Resources Australia Pty. Ltd.

Perpetual Investments Limited

Schroder Investment Management (Australia) Limited

Lazard Asset Management Pacific Limited

Allan Gray Australia Pty. Ltd.

9 6

516,093,911

409,710,617

224,569,169

214,912,407

204,660,488

17.92

14.23

8.00

7.46

7.11

2015
US$
MILLION

2014
US$
MILLION

2013
US$
MILLION

2012
US$
MILLION

2011
US$
MILLION

FINANCIAL HISTORY

ALUMINA LIMITED AND CONTROLLED ENTITIES

AS AT 31 DECEMBER

Revenue from continuing operations

Share of net profit/(loss) of associates
accounted for using the equity method

Other income

General and administrative expenses

Change in fair value of derivatives/foreign
exchange losses

Finance costs

Income tax (expense)/benefit from
continuing operations

Net profit/(loss) attributable to
owners of Alumina Limited

Total assets

Total liabilities

Net assets

Shareholders’ funds

Dividends declared

Dividends received from AWAC

Statistics

0.1

109.9

–

(11.9)

(3.2)

(6.6)

–

88.3

2,110.7

127.8

1,982.9

171.22

61.4

0.1

(73.6)

1.5

(13.5)

1.6

(13.6)

(0.8)

(98.3)

2,543.2

119.2

2,424.0

–

16.0

Dividends declared per ordinary share

US6.3c4

US1.6c

Dividend payout ratio

Return on equity1

Gearing (net debt to equity)

Net tangible assets backing per share

202%

3.9%

4.8%

$0.60

–

(3.5)%

3.4%

$0.77

0.3

(97.4)

137.1

(17.2)

3.0

(25.3)

–

0.1

(7.5)

–

(19.0)

0.6

(29.4)

(0.4)

0.2

173.1

–

(17.3)

0.1

(28.5)

(1.0)

0.5

(55.6)

126.6

2,964.0

170.6

2,793.4

–

100.0

– 5

–

0.02%

4.6%

$0.91

3,311.4

682.9

2,628.5

73.23

86.0

– 5

–

(2.0)%

20.1%

$0.97

3,350.4

496.4

2,854.0

170.8

232.2

US6.0c

136%

4.1%

14.1%

$1.06

1 Based on net profit attributable to members of Alumina Limited.

2 Final dividend for the financial year ended 31 December 2014, declared and paid in 2015 and interim dividend for the year ended

31 December 2015, declared and paid in 2015.

3 Final dividend for the financial year ended 31 December 2011, declared and paid in 2012.

4 Interim dividend of 4.5 cents per share and final dividend of 1.8 cents per share for the year ended 31 December 2015.

5 No interim or final dividend declared for the years ended 31 December 2013 and 31 December 2012.

Design: ERD.COM.AU
Print: BAMBRA PRESS

Neither Alumina nor any other person warrants or guarantees the future
performance of Alumina or any return on any investment made in
Alumina securities. This document may contain certain forward-looking
statements, including forward-looking statements within the meaning
of the US Private Securities Litigation Reform Act of 1995. The words
“anticipate”, “aim”, “believe”, “expect”, “project”, “estimate”, “forecast”,
“intend”, “likely”, “should”, “could”, “will”, “may”, “target”, “plan” and
other similar expressions (including indications of “objectives”) are
intended to identify forward-looking statements. Indications of, and
guidance on, future financial position and performance and distributions,
and statements regarding Alumina’s future developments and the market
outlook, are also forward-looking statements.

Any forward-looking statements contained in this document are not
guarantees of future performance. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors, many
of which are beyond the control of Alumina and its directors, officers,
employees and agents that may cause actual results to differ materially
from those expressed or implied in such statements. Those risks,
uncertainties and other factors include (without limitation): (a) material
adverse changes in global economic conditions, alumina or aluminium
industry conditions or the markets served by AWAC; (b) changes in
production or development costs, production levels or sales agreements;
(c) changes in laws, regulations or policies; (d) changes in alumina or
aluminium prices or currency exchange rates; (e) Alumina Limited does
not hold a majority interest in AWAC and decisions made by majority
vote may not be in the best interests of Alumina Limited; and (f) the
other risk factors summarised in Alumina’s Annual Report 2015. Readers
should not place undue reliance on forward-looking statements. Except
as required by law, Alumina disclaims any responsibility to update or
revise any forward-looking statements to reflect any new information
or any change in the events, conditions or circumstances on which a
statement is based or to which it relates.

ALUMINA LIMITED
ABN 85 004 820 419
Registered Corporate Head Office
Level 12, IBM Centre 60 City Road
Southbank Victoria 3006 Australia

GPO Box 5411
Melbourne Victoria 3001 Australia
Telephone +61 (0)3 8699 2600
Facsimile +61 (0)3 8699 2699
Website www.aluminalimited.com
Email info@aluminalimited.com

AMERICAN DEPOSITARY RECEIPTS
BNY Mellon shareowner services telephone and
internet correspondence:
Toll free number (for callers within the USA)
1-888-BNY-ADRS (1-888-269-2377)
Telephone (for non-US callers) +1 201-680-6825
Website: www.bnymellon.com/shareowner
Email: shrrelations@bnymellon.com

Shareowner correspondence should be mailed to:
BNY Mellon Shareowner Services
P.O. Box 30170
College Station, TX 77842-3170

Overnight Shareowner correspondence
should be mailed to:
211 Quality Circle, Suite 210
College Station, TX 77845

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