Alumina Annual Report 2016

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FY2016 Annual Report · Alumina

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The
transformation of
Alumina Limited

Annual
Report
2016

At a Glance

Chairman and Chief Executive Officer’s report

Sustainability

Director’s Report

Operating and Financial Review

Letter by Chair of Compensation Committee

Remuneration Report

Financial Report

Shareholder Information

Financial History

100

Alumina Limited has elected to release its 2016 Corporate Governance Statement only on the
Company website at: www.aluminalimited.com/governance

Alumina Limited has renegotiated its joint venture
agreement with Alcoa and has emerged more
autonomous, more flexible and stronger than ever.

Alumina will continue to enjoy the benefits of
that partnership, with fresh potential to forge an
exciting future as we unlock significant value and
opportunities for our business, our people and
our shareholders.

AT A glance

AWAC – A GLOBAL business

Lower average realised alumina prices and charges associated with the continuing portfolio restructuring and repositioning, resulted in a reduction of the overall operating performance of AWAC and negatively impacted Alumina Limited’s results for the year. Whilst portfolio restructuring results in additional costs to AWAC, these actions are necessary to strengthen its competitive position. In 2016 Alumina Limited (Alumina) recorded a net loss after tax of $30.2 million compared to a net profit of $88.3 million in 2015. In context, the Company would have made a net profit of $84.7 million (2015: $258.2 million) excluding significant item. Alumina Limited is a leading Australian company listed on the Australian Securities Exchange (ASX) and trades in the US on the OTCQX market. We invest worldwide in bauxite mining, alumina refining and selected aluminium smelting operations through our 40% ownership of Alcoa World Alumina and Chemicals (AWAC). Our partner, Alcoa Corporation (Alcoa), owns the remaining 60% of AWAC, and is the manager. The AWAC joint venture was formed in 1995 and our relationship with Alcoa dates back to 1961.Alumina Limited represents a unique opportunity for a pure investment in AWAC, one of the world’s largest bauxite and alumina producers.In 2016 AWAC recorded a net profit after tax of $49.0 million compared to a net profit after tax of $318.2 million in 2015. 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 declined by $607.3 million to $757.2 million. 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.The origins of the Alcoa Worldwide Alumina and Chemicals (AWAC) partnership between Alcoa Inc. 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 Inc. 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 Inc. combined their respective bauxite, alumina and alumina-based chemicals businesses and investments and some selected smelting operations to create Alcoa World Alumina and Chemicals (AWAC) in January 1995.Following the separation of Alcoa Inc. into Alcoa Corporation and Arconic Inc., on 1 November 2016, Alcoa Corporation replaces Alcoa Inc. as Alumina’s joint venture partner in the AWAC joint venture.The completion of the separation also saw changes to the joint venture agreements which are intended to align more closely the partners’ interests in AWAC, while establishing greater strategic flexibility and autonomy for both partners. ALUMINA LIMITED ANNUAL REPORT 2016

ALUMINA LIMITED

AWAC

$(30.2)M

NET LOSS AFTER TAX
US$30.2 MILLION
(2015: NET PROFIT AFTER TAX:
US$88.3 MILLION)

$49.0M

AWAC NET PROFIT AFTER TAX US$49.0
MILLION (2015: NET LOSS AFTER TAX:
US$318.2 MILLION)

$84.7M

$355.2M

PROFIT EXCLUDING SIGNIFICANT
ITEMS OF US$84.7 MILLION
(2015: PROFIT: US$258.2 MILLION)

NET PROFIT EXCLUDING SIGNIFICANT
ITEMS US$355.2 MILLION
(2015: NET PROFIT EXCLUDING
SIGNIFICANT ITEMS US$703.6 MILLION)

$83.8M

NET DEBT US$83.8 MILLION
(2015: US$101.2 MILLION)

$232.8M

CASH RECEIPTS OF
US$232.8 MILLION
(2015: US$106.3 MILLION)

12.6M TONNES

ALUMINA PRODUCTION
OF 12.6 MILLION TONNES
(2015: 15.1 MILLION TONNES)

6.3M BONE DRY
TONNES (BDT)

BAUXITE THIRD PARTY SALES OF 6.3 BDT
(2015: 2.0 MILLION BDT)

Alumina Limited has had limited
flexibility to change or restructure
its interest to increase shareholder
value. It has sought to restructure
the AWAC joint venture for many
years. Agreements to give effect
to transformational changes were
executed on 1 September 2016
following lengthy negotiations.

ALUMINA LIMITED ANNUAL REPORT 2016

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S report

INTRODUCTION

ALCOA INC SEPARATION

2016 was a watershed year for Alumina Limited (Alumina).

Alumina pursued and agreed fundamental and far
reaching changes to the AWAC Joint Venture agreements
(largely unchanged since inception), effectively strengthening its
position in the Joint Venture in a number of significant respects.

The changes to the agreements followed Alcoa Inc’s decision
to separate its upstream and downstream assets, in effect
replacing Alumina’s AWAC joint venture partner with a new
one. They were agreed by Alcoa Inc and Alumina as key
elements of Alumina’s acceptance of Alcoa Inc’s Separation.

The changes:

• strengthen Alumina’s influence over its investment in AWAC
• increase Alumina’s strategic flexibility and autonomy as a

corporate entity

• improve capital efficiency and cash distributions

2016 also saw the substantial completion of the restructuring
of the AWAC asset portfolio, largely concluding a fundamental
re-casting of the portfolio initiated over the last three years. The
Suralco, Pt Comfort and Jamalco refineries and Point Henry
smelter are no longer active assets within AWAC. Decisions to
sell, curtail or close assets are never easy but are necessary to
ensure a strong business for the long term. However, the active
restructuring maintains AWAC’s competitive portfolio of assets.

Total shareholder returns over the past three years have been
95 per cent, putting Alumina in the top decile of performance
against ASX100 and international aluminium peers. Dividends,
which recommenced in 2014 to shareholders, have also
increased from US1.6 cents per share to US6.0 cents per
share over the three years.

Our AWAC partner, Alcoa Inc, announced in September
2015 a plan to separate into two independent publicly traded
companies. The Separation was completed in November 2016,
with one of the separated companies (Alcoa Corporation)
comprising Alcoa’s upstream business, including its 60 per cent
interest in AWAC.

Alumina held concerns that the Alcoa Inc Separation would
in effect replace Alumina’s familiar and long-standing joint
venture partner with a new one, resulting in an adverse change
in the nature of Alumina’s partner in AWAC. Alumina was also
of the view that the Alcoa Inc Separation created rights of first
offer over various interests in its favor and also required
Alumina’s consent.

Alumina raised these concerns with Alcoa Inc and proposed
amendments to the AWAC joint venture agreements to protect
the interests of Alumina’s shareholders. Alumina undertook
detailed negotiations with Alcoa Inc on its Separation until late
May 2016.

On 27 May 2016, Alcoa Inc filed an application in the
Chancery Court in Delaware seeking declarations regarding
Alumina’s rights in the context of the Alcoa Inc Separation.

Alumina’s objective throughout the discussions with Alcoa Inc
and the conduct of the Delaware litigation was to resolve these
issues in a manner that protected the interests of its shareholders
yet remained within the framework of the consent and offer
rights in the AWAC joint venture agreements.

Alcoa Inc and Alumina agreed in September 2016 to make
certain changes to the AWAC joint venture and terminate the
litigation in the Delaware Court. Among other improvements,
the changes provided Alumina with enhanced supermajority
rights and greater certainty over cash flows. The changes also
provided for the removal of the poison pill effect that is created
by the joint venture exclusivity provisions. These changes are
outlined in greater detail on page 19 and 20.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S report

The changes to the AWAC joint venture and its agreements are
the first substantive changes since AWAC’s formation in 1995.
The expenses incurred in undertaking this process were significant
but necessary and we believe resulted in a transformational
change in our position as 40 per cent co-venturer.

The ramping up of the Saudi Arabian bauxite mine and alumina
refinery with Ma’aden proceeded during 2016 and will add low
cash cost production to AWAC. The refinery is expected to
reach its full production capacity of 1.8 million mtpy during
2017 and be within the lowest quartile on a cash cost basis.

Alumina Limited has enjoyed a successful relationship with Alcoa
for over 50 years, and look forward to working together in this
next phase. We believe Alumina’s interests are now more aligned
with Alcoa Corporation and there is the opportunity to deepen
the working relationship between the two companies. Alumina’s
partner in AWAC, Alcoa Corporation is now focused solely on
upstream assets, including AWAC. The early stages of working
with the new management of Alcoa have been very productive.

OPERATING HIGHLIGHTS

AWAC’s world class assets continued to produce solid returns
for shareholders in 2016. This was underpinned by recent
restructuring of the asset portfolio and strong productivity
improvements which enabled AWAC to withstand the low
alumina prices prevailing through much of 2016.

In the past 3 years the AWAC joint venture has improved its
position on the alumina industry cost curve from the 25th
percentile to the 17th percentile. This has enabled AWAC to
generate average EBITDA alumina margins of $69 per tonne
of alumina produced over that period.

Alumina Limited’s full year net profit after tax was
US$84.7 million, excluding significant items. The curtailment
and closure of the Point Comfort and Suralco refineries resulted in
restructuring charges of $69.9 million. Those charges, together
with non cash writedowns of $45.0 million reduced the
Company’s result to a loss of $30.2 million.

AWAC’s EBITDA margin for alumina production in 2016
was $63 per tonne, lower than the $91 margin for 2015.
This reflected the 15.5 per cent decline in alumina spot prices
for the year. Alumina prices traded in a range between $197
and $351 per tonne in 2016.

AWAC responded quickly to the low pricing environment in
2016 – it achieved an excellent cost reduction in the alumina
operations of $25 per tonne during 2016. Lower energy costs,
a stronger US dollar and productivity initiatives in materials,
maintenance and transport all contributed to the reduction. This
has positioned AWAC well to deliver strong cash flows in 2017.

AWAC’s low cost operations in Australia and Brazil again
achieved production records in 2016. AWAC’s operating
portfolio now reflects bauxite and alumina assets located in
the first and second quartile on the industry cost curve.
The Australian and Brazilian refineries have achieved average
annual production increases of one per cent since 2013.

There was a continued progression by AWAC to sales on a spot
or index basis, which also contributed to improved margins.
During 2016, 84 per cent of AWAC’s total sales were on an
indexed or spot basis. The move to have alumina priced on its
own fundamentals has been beneficial to AWAC and should
continue to be so.

Alumina prices have experienced significant volatility in recent
years, similar to many other commodities. From record lows in
early 2016, alumina prices rebounded in late 2016 and 2017.
A number of market developments have resulted in this price
recovery, including supply restrictions and increased demand
in China.

While alumina prices were at low levels for the year, Alumina
Limited continued to receive cash distributions from AWAC. This
enabled payment of a final dividend of US3.1 cents per share,
bringing the total declared dividend for the year to US6.0 cents
per share.

AWAC continued to develop bauxite mining as a separate
business unit during 2016. The bauxite business unit has made
great strides in implementing its strategy of developing bauxite
sales to third parties.

AWAC also secured its first major third party contract to supply
approximately 400,000 tonnes of bauxite from its Huntly mine
in Western Australia. The Western Australian State Government
has also granted approval for AWAC to export up to 2.5 million
metric tonnes per annum of bauxite for five years to third party
customers. Bauxite exports from the Western Australian
operations have the potential to create a supplementary income
stream for AWAC.

AWAC now supplies over 6 million tonnes annually to the third
party bauxite market.

The Juruti mine has been successfully expanded from an initial
design capacity of 2.6 million mtpa to 6 million mtpa with very
little additional capital investment. The resource potential is very
significant and additional installed but latent capacity exists at
the port and other key infrastructure components. Together
these provide the scope for significant and profitable expansions
in the future as the bauxite market continues to grow.

Further investment to grow the bauxite business is planned for
2017. Alumina is supportive of AWAC growing third party sales
to meet market demand and seeking forms of index pricing for
bauxite that reflects its fundamentals.

ALUMINA LIMITED ANNUAL REPORT 2016

CAPITAL MANAGEMENT

Alumina Limited is a vehicle that primarily passes through to
shareholders the cash flow from its interest in AWAC. Alumina’s
dividend policy is that the Board intends on an annual basis
to distribute cash from operations after debt servicing and
corporate costs commitments have been met. The Board will
also consider the capital structure of Alumina Limited, the capital
requirements for the AWAC business and market conditions.

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. Alumina’s debt
levels have been, on average below $140 million since 2014,
whilst consistent dividends have been paid to shareholders.
A total of US13.9 cents per share has been distributed to
shareholders for the last 3 years.

Corporate costs for Alumina Limited in 2016 were higher as
a result of expenses incurred to reach agreement on the Alcoa
Inc Separation. The expenses (including legal, financial and
other advisors) also included significant costs for the Delaware
litigation. Whilst these expenses were substantial, they were
required to protect Alumina’s interests and ultimately enabled a
substantial improvement in our joint venture interest. Corporate
costs are expected to revert in 2017 to historical norms.

Alumina’s net debt is at low levels and gearing is 4.0 per cent.
The resilience of Alumina’s balance sheet served it well during
the challenging market conditions in 2016. The Company’s debt
levels enabled total dividends to shareholders of US6.0 cents per
share to be paid in respect of 2016. This is particularly pleasing
as the 2016 dividends were paid in a year of record low
alumina prices.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S report

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, one of the world’s largest alumina and
bauxite producers.

Alumina ensures it has a thorough understanding of the industry
so that it can effectively participate in the AWAC joint venture
and manage its own position in the industry. There are many
facets to the joint venture which require discussion and resolution
with our partner, such as the Alcoa Inc Separation. A key part
of the Alumina’s strategy is to protect the value of our joint
venture interest.

The bauxite and alumina industry continues to change rapidly.
The bauxite industry in particular has seen production spikes
move from Indonesia to Malaysia and now Guinea. It is difficult
to predict the future stance by various governments on
bauxite exports.

AWAC’s strategy over several years has been to achieve an
asset portfolio of tier one assets and ensure other refineries are
cash positive throughout the cycle. AWAC has tier one assets
in the Pinjarra, Wagerup, Sao Luis and Ma’aden refineries and
their associated mines. Substantial improvements have been
made to the Kwinana and San Ciprian refineries. AWAC’s
strategy has seen its portfolio rationalised with assets sold,
curtailed or closed. Together with cost reduction programs
over the last 3 years, this has resulted in cash production
costs reducing by $67 per tonne.

The 30 year electricity contract for the Portland smelter expired
in October 2016. The smelter was faced with a very substantial
increase in energy costs, including transmission costs. The
smelter’s position was further hampered by an interruption in
energy supply in December 2016, which disabled approximately
80 per cent of production capacity. In 2017, Alcoa of Australia
entered into arrangements for a new 4 year power supply and
agreements with Victorian and Australian Federal Governments
for the restart of the smelter. These arrangements enable the
smelter’s challenges to be better managed while a long term
energy solution is sought. Power prices paid by the smelter are
approximately 50 to 100 per cent higher than prices paid by
similar operations in the Western World.

Portland’s future is secured only for the medium term. It faces
numerous uncertainties now gripping Eastern Australia in the
wake of many years of energy policy-making that have
weakened the economy’s traditional competitive energy
strengths. The closure of Hazelwood power station in Victoria
will raise Victoria’s energy costs for industry. Victoria and other
Australian States have imposed limits on gas exploration, delays
on coal project developments and over-ambitious intermittent

energy targets, which together inspire great concerns about
the case for reinvestment in energy intensive manufacturing
industries. Although the Company’s core alumina assets are
not yet impacted by these East Coast developments, there is
no room for complacency. The Company is seriously concerned
and intends to support collective industry initiatives to submit
current policies to scrutiny and where appropriate to support
raising the quality of the policy debate.

GOVERNANCE

The Remuneration Report reviews Alumina’s remuneration
strategy, policy and outcomes. The transformation of our joint
venture position achieved by executives in 2016 was recognised
in awarding of short term incentives above target levels. The
2016 Remuneration Report provides full details of this and
assessment of performance against personal objectives in
awarding short term incentives for the year.

Alumina Limited reports its governance practices consistent with
the 3rd Edition of the Corporate Governance Principles and
Recommendations of the ASX Corporate Governance Council.
Alumina’s compliance with the Corporate Governance Principles
and Recommendations is defined in the Appendix 4G lodged
with the ASX.

For Non-Executive Directors, there is no increase in fees for the
2016 year and fees have been unchanged since 1 January 2011.

SUSTAINABILITY

AWAC is a substantial energy and capital intensive global
business and its social, environmental and economic impacts
extend like a ripple effect to affect direct and indirect
stakeholders. Management at Alumina Limited and Alcoa
Corporation (the manager/operator) have identified a number
of material aspects of the business that impact stakeholders and
provide a challenge to achieve improved outcomes. Alcoa has
developed a number of stretch targets to improve the efficiency
of the business. The material aspects and their targets are
disclosed on page 12 of this report. The underlying approach
to improving sustainability outcomes is the incorporation of the
targets into business strategy and ultimately, the day to-day
operation of the business. AWAC continues to focus on achieving
those goals and assessing its performance. This dedication at
an operational level has resulted in positive outcomes, such as
reducing energy consumption and greenhouse gas emission
intensity. Other critical targets, such as the elimination of
fatalities, require a sustained effort. Alumina Limited’s
Sustainability Update on Alumina’s website discloses the
approach to sustainability, goals and results.

ALUMINA LIMITED ANNUAL REPORT 2016

OUTLOOK

CONCLUSION

The alumina price increased by 78 per cent over the course of
2016. This was primarily due to widespread refining curtailments
around the start of the year, an increase in smelter production
over the year and Chinese alumina supply restrictions.

The Chinese alumina utilisation rate was reported to be running
at 93 per cent of installed capacity in January 2017, and there
will be relatively few additions to alumina capacity brought on
outside China this year. Supply and demand for alumina over
2017 is expected to be broadly balanced.

There are various uncertainties in the industry’s outlook which
will impact bauxite and alumina prices. For example, there have
been recent reports that China is considering compulsory cuts
to production of energy intensive industries for seasonal pollution
control reasons from November 2017 to March 2018. This
could include alumina and aluminium. Also, Indonesia may
resume bauxite exports.

The last year has been a very significant one for Alumina
Limited. The changes and developments which occurred
should see a different and exciting future.

Alumina Limited was well prepared for and withstood the
weak alumina prices during 2016. The AWAC asset portfolio
is stronger than ever and we are well positioned to benefit from
the recent price recovery. At the level of commodity prices and
exchange rates in early 2017, AWAC is positioned to produce
strong cash flows.

We thank our employees for their work to sustain and improve
Alumina Limited during 2016.

Peter Wasow Chief Executive Officer

GJ Pizzey Chairman

SUSTAIN
FOSTER, NUTURE, PRESERVE,
SUPPORT, BOLSTER

ABILITY
RESOURCEFULNESS, COMPETENCY,
CAPABILITY, STRENGTH, APTITUDE

AWAC harnesses the
resourcefulness, competency,
capability and strength of
its workforce to develop the
business responsibly and
create a positive legacy for
its numerous stakeholders.

ALUMINA LIMITED ANNUAL REPORT 2016

SUSTAIN ability

Alumina Limited shares a common belief with Alcoa Corporation,
that is, the impacts of a business stretch beyond its corporate
boundaries to affect economic, social and environmental
aspects of stakeholders. Stakeholders range from people
directly affected by the business; employees, shareholders,
suppliers, customers and the people of the localities in which
the business operates to people indirectly impacted such as
product end users. To operate sustainably means to recognise
the responsibility to these various interested parties and to act
accordingly. AWAC harnesses the resourcefulness, competency,
capability and strength of its workforce to develop the business
responsibly and create a positive legacy for its numerous
stakeholders.

We believe that sustainability is about working more effectively
and efficiently to improve environmental outcomes and limit the
impact on the environment, improve the quality of life of people
impacted by Alcoa World Alumina and Chemicals (AWAC)
operations including the safety and health of AWAC employees
and drive business performance and long-term stakeholder value.

To be effective, we believe that sustainability goals need to be
incorporated into business strategy and processes rather than
a subordinate effort that risks being diluted. Also, sustainability
goals must be measureable, accountable and impact
performance indicators.

As a non-operating partner in AWAC, we turn to, and support,
AWAC’s operating manager Alcoa, in its sustainability program.
Alcoa, the operator/manager of AWAC’s business is a world
leader of best-practice sustainability.

GOVERNANCE AND RISK

Alumina Limited supports Alcoa’s sustainability vision and also
seeks to protect its own stakeholder interests by engaging in a
governance process with Alcoa that includes participation in:

• AWAC’s Strategic Council (the formal governing body

of AWAC),

• The Board of Alcoa of Australia,
• The Board of Alcoa World Alumina LLC and
• The AWA of Brazil SA Advisory Board.

Representation on the above bodies enables Alumina Limited
access to consider, amongst other matters:

• AWAC’s long-term strategy
• detailed reporting of sustainability performance against

targets and key indicators

• industry and market outlook
• occupational health, safety and environmental performance.

In addition, Alumina Limited’s management holds regular
discussions with AWAC management on operational matters.
Alumina Limited’s Board and management also visit AWAC
operational sites to gain first-hand insight into operational matters.

Alumina Limited has a Risk Management Framework to assess
sustainability risk levels and identify strategies to minimise
impact and maximise opportunity.

Regarding the AWAC joint venture, Alcoa is the manager
and has a key risk management role over the operations,
administration and marketing functions. Alcoa have, as a result
of their assessments, established group wide sustainability goals
that have implications for AWAC operations.

Separately Alumina Limited conducted an internal assessment
to identify the key AWAC sustainability matters that can affect
Alumina’s stakeholders.

SUSTAIN ability

SUSTAINBILITY MATERIAL RISKS AND LONGER-TERM OBJECTIVES

AWAC AREAS OF
KEY MATERIALITY

Energy usage
and security

POTENTIAL IMPACT ON SUSTAINABILITY OF AWAC

LONG-TERM GLOBAL OBJECTIVES
ESTABLISHED BY ALCOA1

Energy is an essential component in alumina and aluminium
production. As both processes are energy intensive, it represents
approximately 23% of all alumina costs and 28% of all
aluminium costs. Energy efficiency is a key factor in
sustainable business and environmental performance.

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

Water management
and security

Water is an essential raw material, used at every point
of AWAC’s mining, refining and smelting operations. Water
scarcity has the potential to impact AWAC’s costs, production
volume and financial performance.

From a 2005 baseline, a 25% reduction
in average freshwater-use intensity and
30% by 2030.2

From a 2005 baseline, a 30% reduction
in total (direct and indirect) carbon
dioxide equivalent intensity for global
operations (which includes AWAC
operations) by 2020, and 35% by 20302.

Aggressive minimum environmental
footprints for each mine to achieve
by 2020.

Rehabilitate 30% of total bauxite residue
storage area by 2020; 40% by 2030

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

From a 2005 baseline, reduce bauxite
residue land requirements per unit of
alumina produced by 15% by 2020;
30% by 2030.

Zero fatalities and serious injuries
and illnesses.

Emissions

Aluminium production is an energy-intensive operation.
The carbon footprint is significantly affected by the electricity
energy provider. Greenhouse gas emissions (GHG) are the
natural corollary to AWAC’S energy-intensive operations.

Land management
and rehabilitation

Waste

Bauxite mining accounts for most of the land that is disturbed as
a result of AWAC’s operations. AWAC is committed to minimising
the disturbance of the original habitat. It works closely with
community and regulatory stakeholders to restore those lands
affected to the most productive use possible, including, where
feasible, re-establishing pre-operating conditions.

Alumina and aluminium processing creates waste products, the
most significant being bauxite residue (approximately 1.5 tonne
of residue results per tonne of alumina produced). Minimising
waste through innovative processes and alternative uses for
waste products is a priority that will reduce AWAC’s
environmental footprint.

Workforce health
and safety

Managing safety in AWAC’s complex mining and manufacturing
environment requires strong systems as well as a focused safety
culture committed to continuous improvement. As the operator,
Alcoa has invested substantial intellectual, financial and system
resources over several decades to understand the key drivers
behind safety behaviour. The sole aim is to eliminate fatalities
and serious injuries from AWAC’s operations.

Relationships with
neighbouring local
communities where
AWAC conducts
business

AWAC is a global enterprise that conducts business in diverse
markets and different communities, each with their own values
and customs. It is important that interactions are conducted
in a way that respects local communities and human rights
fostering positive long-term relationships for mutual benefit.

Alcoa, through their sustainability management processes, developed global sustainability objectives that are measured from a global business perspective.
The AWAC assets form a substantial part of Alcoa Corporation’s global business. However, that business also includes Alcoa’s global smelting
operations. The AWAC assets contribute to meeting Alcoa’s total business sustainability goals.
In 2012 Alcoa amended their 2020 and 2030 sustainability targets for greenhouse gas intensity improvement and freshwater use intensity after successfully
exceeding, on a global operations basis, their original 2020 goals. The previous goals for freshwater-use intensity were a 10 per cent reduction by 2020
and 25 per cent by 2030 and the previous goals for total emission intensity were, 20 per cent by 2020 and 30 per cent by 2030.
For a more detailed account of Alumina Limited’s Sustainability policy, approach and outcomes, please refer to Sustainability on the Company’s website
at http://www.aluminalimited.com/sustainability-update-2015/

ALUMINA LIMITED ANNUAL REPORT 2016

To be effective, we believe that
sustainability goals need to
be incorporated into business
strategy and processes rather
than a subordinate effort
that risks being diluted. Also,
sustainability goals must be
measureable, accountable and
impact performance indicators.

DIRECTOR’S 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 2016 (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:

He is a member of the Audit and Risk Management 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.

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
2016 were:

MR G JOHN PIZZEY
B.E (CHEM), FELL. DIP. MANAGEMENT., FTSE, FAICD

Independent Non-Executive Director and Chairman

Mr Pizzey was elected a Non-Executive 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.

MS EMMA R STEIN
BSC (PHYSICS) HONS, MBA, FAICD, HON FELLOW WSU

Independent Non-Executive Director

Ms Stein was elected as a Non-Executive 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
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.

ALUMINA LIMITED ANNUAL REPORT 2016

MR PETER C WASOW
BCOM, GRADDIPMGMT, FCPA

Managing Director and Chief Executive Officer

He has been working in Australia since 1994 and has extensive
experience in various industries including aluminium smelting
and coal mining.

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).
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 Non-Executive 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.

MR W PETER DAY
LLB (HONS), MBA, FCA, FCPA, FAICD

Independent Non-Executive Director

Mr Day was appointed as a Non-Executive 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 (appointed August 2007),
Australian Office Fund (appointed September 2015), and Boart
Longyear (appointed February 2014), and a former director of
Federation Centres (October 2009–February 2014), Orbital
Corporation (August 2007–February 2014) and SAI Global
(August 2008–December 2016). 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.
He also supports initiatives in disability services and mentoring.

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. Mr Ferraro is also a Non-Executive Director of Helloworld
Limited (appointed January 2017).

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 G JOHN PIZZEY

MS EMMA R STEIN

MR PETER C WASOW

MR CHEN ZENG

MR W PETER DAY

MR MICHAEL P FERRARO

COMPANY SECRETARY

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.

MEETINGS OF DIRECTORS
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 59 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 58 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 2016

BOARD
MEETING

AUDIT AND RISK MANAGEMENT
COMMITTEE MEETINGS

COMPENSATION
COMMITTEE MEETINGS

NOMINATIONS
COMMITTEE MEETINGS

Directors

G J Pizzey

E R Stein

C Zeng

P Day

M Ferraro

P Wasow

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Notes:
1. Mr Pizzey was granted leave of absence for one Audit and Risk Management Committee meeting and one Compensation Committee meeting.
2. Mr Zeng was an apology for one meeting of the Audit and Risk Management Committee.

ALUMINA LIMITED ANNUAL REPORT 2016

INDEMNITY OF OFFICERS

REVIEW OF OPERATIONS AND RESULTS

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

The financial results for the Group include the 12 month results
of AWAC and associated corporate activities. The Group’s net
loss after tax for the 2016 financial year attributable to members
of the Company was US$(30.2) million (2015: US$88.3 million
profit). Excluding significant items, there would have been a net
profit after tax of US$84.7 million (2015: US$258.2 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 19 to 33 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 86), there are no significant
matters, circumstances or 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 2016.

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 2016.

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 77.

ENVIRONMENTAL REGULATION

PRINCIPAL ACTIVITIES

The principal activities of the Group relate to its 40 per cent
interest in the series of operating entities forming Alcoa World
Alumina and Chemicals (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.

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 ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191.
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
Instrument.

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 86.

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 86.

CORPORATE GOVERNANCE STATEMENT

The Company has, for the 2016 reporting year, elected to
disclose the Corporate Governance Statement only on the
Company web site. The Corporate Governance Statement can
be found at URL http://www.aluminalimited.com/governance/

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of Alumina Limited for the year ended 31 December 2016, 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
23 March 2017
PricewaterhouseCoopers
Liability limited by a scheme approved
under Professional Standards Legislation

ALUMINA LIMITED ANNUAL REPORT 2016

OPERATING AND FINANCIAL review

NOTE REGARDING NON-IFRS FINANCIAL INFORMATION

CONTENTS

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.

1. STRATEGY AND BUSINESS MODEL

2. PRINCIPAL RISKS

3. REVIEW OF AWAC OPERATIONS

4. AWAC FINANCIAL REVIEW

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.

1. STRATEGY AND BUSINESS MODEL

BUSINESS MODEL

5. ALUMINA LIMITED FINANCIAL REVIEW

6. MARKET OUTLOOK AND GUIDANCE

The Operating and Financial Review should be read in conjunction
with the financial statements, which are presented on pages 60
to 92 of this annual report.

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 combining their respective global bauxite, alumina and
alumina-based chemicals business and investments and their
respective aluminium smelting operations in Australia. AWAC is
one of the world’s largest alumina producers and bauxite miners.

Following the separation of Alcoa Inc. into Alcoa Corporation
and Arconic Inc. on 1 November 2016, Alcoa Corporation
(Alcoa) replaced Alcoa Inc as Alumina Limited’s partner in the
AWAC joint venture. This partnership provides investors with a
direct investment in the bauxite and alumina industry. Alcoa
owns the 60% interest in the joint venture and manages the
day-to-day operations.

Prior to the separation of Alcoa Inc and as announced by
Alumina Limited on 2 September 2016, Alcoa Inc. and Alumina
Limited agreed certain changes to the governance and financial
policies of the joint venture. The changes align more closely the
partners’ interests in AWAC, promote faster decision-making,
provide for joint input on significant decisions, improve information
sharing and streamline the dispute resolution process.

The changes also simplified AWAC’s dividend and cash
management policies. Each company in the AWAC joint venture
will pay a minimum quarterly distribution of 50% of the prior
quarter’s net profit, instead of the current payment of an annual
dividend equal to 30% of after tax operating income (ATOI). In
addition, any surplus cash (as defined in the Agreements) within
certain AWAC companies will be distributed quarterly. The
agreement also requires that AWAC raise a limited amount
of debt to fund future mutually agreed growth projects.

The Strategic Council remained 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 historically required a super-majority vote:

• change of the scope of AWAC.
• change in the dividend policy.
• equity calls on behalf of AWAC totalling, in any one year,

in excess of $1 billion.

Following Alcoa Inc’s separation on 1 November 2016,
the following matters also require a super-majority vote:

• acquisitions, divestitures, expansions and curtailments
exceeding 2 million tonnes per annum of bauxite or
0.5 million tonnes per annum of alumina or which have
a sale price, acquisition price, or project total capital cost
of US$50 million or greater.

• implementation of related party transactions in excess

of US$50 million.

• implementation of financial derivatives, hedges and other
commodity price or interest rate protection mechanisms.

• decision to file for insolvency in respect of any AWAC company.

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 the boards of 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 exclusivity 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). Effective upon Alcoa
Inc’s separation on 1 November 2016, immediately on and
from a change in control of either Alumina or Alcoa, the
exclusivity provisions would terminate.

Also effective immediately on and from a change in control
of either Alumina or Alcoa are:

• Future alumina off-take rights, whereby from a date

nominated by Alumina, Alumina or its acquirer will be
entitled to buy, subject to its 40% ownership cap:

• its net short position (calculated as total consumption less
total owned production per annum) of alumina at market
price for its internal consumption; plus

• up to 1 million tonnes per annum alumina off-take,

(equal to approximately 7.5% of AWAC’s current total
annual production) at market prices, which it may market
and sell as it sees fit;

• in all cases subject to AWAC third party customer contracts

being satisfied;

• Future bauxite off-take rights, whereby from a date

nominated by Alumina, Alumina or its acquirer will be
entitled to buy, at market prices, up to its net short position
of bauxite for internal consumption, subject to its 40%
ownership cap.

• Increased opportunity for development projects and

expansions, whereby if either Alumina or Alcoa Corporation
wishes to expand an existing AWAC operation, develop a
new project on AWAC tenements or pursue a project outside
of AWAC, it is entitled to do so on a sole basis after providing
180 days for the other party to explore joint participation in
the proposed project. A partner that avails itself of such an
opportunity would pay for all costs related to the project,
including for AWAC resources and shared facilities used,
and would be entitled to all of the project’s resulting off-take.

ALUMINA LIMITED ANNUAL REPORT 2016

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
(curtailed)

Brazil
Sao Luis (39%)

Spain
San Ciprian

Suriname
Paranam (closed)

USA
Point Comfort
(curtailed)

Saudi Arabia
Ras Al Khair (25.1%)

Refineries:
Refineries are
generally located in
proximity to bauxite
deposits.

Australia
Huntly & Willowdale

Brazil
Trombetas (9.6%)
& Juruti

Guinea
Sangaredi (23%)

Suriname
Moengo, Klaverblad
& Kaimangrassie
(closed)

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.

STRATEGY ANALYSIS

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

Alumina Chemicals:
The 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.

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 seeks to identify ways in which to lower
costs of production and thus achieving a low position on the
cost curve. Achieving a low position on the cost curve allows
AWAC to remain competitive in the event of unfavourable
market movements. AWAC and Alumina Limited generally do
not undertake hedging to manage this 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 activities 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, labour, caustic 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 long 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’s portfolio restructuring
and repositioning continues to ensure that operations as a whole
remain competitive. AWAC also invests in capital expenditure
projects that will reduce cash costs over the long term.

• 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. There is also
a risk that the Alumina Limited and Alcoa may have differing
priorities. During 2016, the joint venture agreements were
modified to ensure that certain key decisions require Alumina
Limited’s consent by a super-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. AWAC and Alumina Limited monitor regulatory
changes, and understand their effect on AWAC.

• 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.

ALUMINA LIMITED ANNUAL REPORT 2016

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. Furthermore, AWAC
maintains a spread of assets and customers across a
portfolio of countries and regions to minimise disruption
and concentration risk.

• 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, but may be necessary to
ensure the ongoing competitiveness of AWAC operations.

• 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. AWAC
mitigates customer risk by having a broad customer base
across many countries and regions. In addition, new alumina
sales agreements are on an alumina index basis. In 2016,
sales of alumina to Alcoa’s smelters were renegotiated to
an alumina index basis, except for some legacy contracts
totalling approximately 0.5 million tonnes.

• Debt refinancing – Alumina Limited’s ability to refinance 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 expiring debt facilities or the costs of
refinancing its debt may increase substantially.

Other risks include:

• an alumina and/or aluminium market in supply surplus may

lead to downward price pressure;

• Chinese growth slowing further and affecting aluminium

consumption and hence aluminium and alumina demand;

• 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 and its subsidiaries 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.

NOVEMBER 2015 Suralco operations
fully curtailed

JUNE 2016 Point Comfort fully curtailed
JANUARY 2017 Suralco operations closed

FEBRUARY 2015 San Ciprian refinery completed its
conversion of energy source from oil to natural gas

San Ciprian

CBG

Ras Al Khair
Al Ba’itha

Point
Comfort

Suralco

Alumar

Juruti

MRN

Kwinana

Huntly

Pinjarra

Willowdale

Wagerup

APRIL 2015 12-year gas supply agreement secured

Portland

AUGUST 2015 Anglesea power station closed following the
Point Henry smelter closure

APRIL 2016 Sale of equity interest in natural gas pipeline

DECEMBER 2016 WA Government approved 2.2 million bone
dry tonnes (BDT) per annum bauxite export for five years

JANUARY 2017 Government assistance and long term
energy contract secured allowing Portland to restart
capacity lost following a power outage

AWAC OPERATIONS

Bauxite mines

Refineries

Smelter

Location

EQUITY INTEREST

Bauxite mines

Refineries

3. REVIEW OF AWAC OPERATIONS

Following the separation of Alcoa Inc. into Alcoa Corporation
and Arconic Inc. on 1 November 2016, Alcoa Corporation
replaced Alcoa Inc as Alumina Limited’s joint venture partner
in the AWAC joint venture.

As announced by Alumina Limited on 2 September 2016,
Alcoa Inc. and Alumina Limited agreed certain changes to
the governance and financial policies of the joint venture.
The changes align more closely the partners’ interests in
AWAC, promote faster decision-making, provide for joint
input on significant decisions, improve information sharing
and streamline the dispute resolution process.

The changes also simplified AWAC’s dividend and cash
management policies and require that AWAC raise a limited
amount of debt to fund future mutually agreed growth projects.
The changes to the joint venture arrangements have not affected
the nature of AWAC’s operations. Furthermore, AWAC’s portfolio
restructuring and repositioning continued on under the new
management with the closure of Suriname operations.

Increased third party sales of bauxite in 2016 reaffirmed the
decision to create the separate mining business unit, which
recognises the growing commercial value of bauxite, and the
extensive resource, mining capabilities and infrastructure
capacity of AWAC.

Whilst portfolio restructuring results in additional costs to AWAC,
these actions are necessary to strengthen its competitive position.

MINING

AWAC’s own mines produced 37.5 million BDT of bauxite,
a decrease of 0.5 million tonnes compared to 2015, which
was due to the closure of the Suralco mine, offset by increased
production in Australia and Brazil. The Juruti mine in Brazil set
an annual production record. Including equity interests, total
bauxite production in 2016 was 42.7 million BDT (2015:
43 million BDT).

ALUMINA LIMITED ANNUAL REPORT 2016

BAUXITE PRODUCTION (MILLION BDT)

5.2

1.6

3.6

Furthermore, on 19 December 2016, Alcoa announced that
the Western Australian government had granted approval for
AWAC to export approximately 2.3 million BDT annually for
a period of 5 years.

32.3

37.5 from
own mines

5.2 proportional
equity basis*

In 2016 AWAC sold a total of 6.3 million BDT of bauxite to
third parties and have approximately 6.8 million BDT
committed sales for 2017.

During 2017 AWAC is expected to complete an incremental
increase in the capacity of the Juruti mine, which could be the
foundation for further expansions, and to invest in infrastructure
development to facilitate further exports from Western Australia.

Huntly & Willowdale

Juruti

MRN

CBG

REFINING

* The Ma’aden joint venture mine is not included.

The 2016 average cash cost per tonne of bauxite produced
by AWAC’s own mines decreased by 24% to $9.8 per BDT
compared to $12.8 per BDT in 2015.

Approximately $2 per BDT of the decrease was as a result of
the curtailment of the higher cost Suralco mine. The balance of
the decrease was predominately due to productivity improvements
and the stronger US dollar against the Australian dollar and the
Brazilian real.

Production of alumina was 12.6 million tonnes in 2016,
compared to 15.1 million tonnes in 2015, and alumina shipments
were 13.3 million and 15.5 million tonnes respectively. The
reduction in both production and sales volume is mainly due to
the closure of Suralco and curtailment of Point Comfort refineries.

The Ma’aden refinery produced 1.4 million tonnes of alumina in
2016 compared to 0.9 million tonnes in 2015 (AWAC’s share
is approximately 359,000 and 220,000 respectively). The 2016
results included $42.6 million of equity losses relating to the
Ma’aden joint venture, compared to $46.2 million in 2015.
It is expected that production at Ma’aden refinery will achieve
nameplate capacity during 2017.

CASH COST PER BDT OF BAUXITE PRODUCED (OWN MINES)

$12.8

($2.0)

($0.1)

($0.8)

ALUMINA PRODUCTION*: CHANGE BY REFINERY (KT)

15,085

(748)

$9.8

(1,741)

(54)

12,644

2015

Suralco

Point
Comfort

Sao
Luis

San
Ciprian

2016

Pinjarra
Wagerup
Kwinana

* Production of AWAC’s operated refineries. Therefore, the Ma’aden joint venture
refinery is not included.

2015

Suriname

Labor

Fuel

Energy

Services

Other

2016

Whilst AWAC remains focused on leveraging its strategic
advantage of having mining operations generally in close
proximity to its refining operations, it is also expanding its
third party bauxite business.

In April 2016, AWAC announced that it signed bauxite supply
contracts with customers in China, Europe and Brazil worth
more than $350 million over two years. AWAC also completed
its first trial cargo shipment of Western Australian bauxite to
China during the first half of 2016, which has led to further
orders for over 0.4 million BDT of bauxite, most of which
will be satisfied during 2017.

In 2016, sales of alumina to Alcoa’s smelters were renegotiated
to an alumina index basis, except for legacy contracts totalling
to approximately 0.5 million tonnes.

Therefore, approximately 84% of AWAC’s total SGA shipments
were priced on spot or alumina indexed basis for 2016 compared
to 79% for 2015. For 2017, SGA shipments on a spot or alumina
indexed basis are expected to be approximately 85% of the
total, rising to 92% in 2018.

The 2016 average realised alumina price decreased by 18%
to $242 per tonne compared to $296 per tonne in 2015.

The Point Comfort refinery was fully curtailed in June 2016.
If this refinery was excluded from the year-end results, then
2016 cash costs would have been $187 per tonne, which
would be 13% lower than the 2015 costs on the same
basis. The balance of the decrease was due to productivity
improvements, the stronger US dollar and lower energy
costs driven by lower energy prices.

The EBITDA margin was $63 per tonne of alumina produced in
2016, a decrease of $28 per tonne compared to 2015. Lower
margins were a result of the lower average realised alumina
prices partially offset by lower costs of production and an
increase in sales of bauxite to third parties.

CASH COST PER TONNE OF ALUMINA PRODUCED

$216

($7)

($3)

($9)

($11)

$191

2015

Suralco

Point
Comfort

Energy

Caustic

Bauxite Conversion 2016
YTD

AWAC’s average 2016 cash cost per tonne of alumina
produced (which includes the mining business unit at cost)
decreased by 11% to $191 per tonne compared to $216 per
tonne in 2015. Approximately seven dollars per tonne of the
decrease is as a result of the curtailment of the higher cost
Suralco mine and refinery which were fully curtailed in November
2015. The Suralco operations were subsequently closed.

SMELTING

The Portland smelter, in which AWAC has a 55% equity interest,
is the remaining smelting operation in the AWAC portfolio.

AWAC’s share of aluminium production was approximately
154,000 tonnes in 2016, which is 5% lower than 2015, mostly
due to a power outage in December 2016. Prior to the electrical
fault the smelter had been operating at nearly 85 percent of its
nameplate capacity of 358,000 metric tonnes per year. The power
outage reduced production to approximately 21% of capacity.

In January, agreements were reached with the Victorian State
and Australian Federal governments and energy provider AGL
Energy Limited, which allow the restart of the lost smelting
capacity. Restoring the curtailed production is expected to take
approximately six months.

Portland’s 2016 average cash cost of aluminium per tonne
produced, up to the point of molten metal exiting the potrooms,
decreased by 7% to $1,471 per tonne, mainly due to lower
alumina prices.

The average realised aluminium price decreased by 11% to
$1,702 per tonne, mainly as a result in the weakening of the
LME aluminium price.

Portland contributed $5 million in EBITDA, at a margin
of $34 per tonne of aluminium produced.

ALUMINA LIMITED ANNUAL REPORT 2016

4. AWAC FINANCIAL REVIEW

The decline in AWAC’s net profit was largely due to the lower average realised alumina price, which was partially offset by lower
charges for significant items, net productivity improvements, lower energy costs and an increase in third party bauxite sales.

AWAC PROFIT AND LOSS (US GAAP)

Net profit after tax

Add back: Income tax charge

Add back: Depreciation and amortisation

Add back: Net interest

EBITDA

Add back: Significant items (pre-tax)

EBITDA excluding significant items

The AWAC’s net profit included the following significant items:

SIGNIFICANT ITEMS (US GAAP)

Suralco restructuring charges

Point Comfort restructuring charges

Anglesea restructuring charges

Gain on sale of interest in the Dampier Bunbury Gas Pipeline

Capital work in progress write-offs

Impairment in an interest in a gas field in Western Australia

Portland impairment charge1

Other (includes severance and redundancy charges, US GAAP pension adjustment)

Total significant items (pre-tax)

Total significant items (after-tax)2

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

49.0

72.3

271.8

0.4

393.5

363.7

757.2

318.2

367.1

302.9

1.3

989.5

375.0

1,364.5

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

(132.8)

(31.0)

(4.3)

27.1

–

(72.3)

(125.8)

(24.6)

(363.7)

(306.2)

(178.4)

(85.7)

(68.2)

–

(33.0)

–

(9.7)

(375.0)

(385.4)

1. For US GAAP purposes the Portland impairment charge was fully recognised in 2016. For AAS, the charge was recognised over the period of two years,

2016 and 2015.

2. For the year ended 31 December 2016, after-tax significant items included a $5.0 million deferred tax assets write-off in relation to the sale of DBNGP.
For the year ended 31 December 2015, after-tax significant items included a $85.2 million tax charge for a revaluation of certain deferred tax assets of
Suralco, which mainly related to employee benefits and the carrying forward of tax losses.

AWAC BALANCE SHEET (US GAAP)

Cash and cash equivalents

Receivables

Related party notes receivable

Inventories

Property, plant & equipment

Other assets

Total Assets

Short term borrowings

Accounts payable

Taxes payable and deferred

Capital lease obligations & long term debt

Other liabilities

Total Liabilities

Equity

The value of assets and liabilities denominated in foreign
currencies increased, mainly due to the effect of the weaker
US dollar at year-end particularly against the Brazilian real.

The reduction of property plant & equipment is predominantly
due to a $125.8 million impairment charge in relation to
the Portland smelter offset by the increase in value of the
foreign assets.

In 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, the
second and final instalment of $200 million was made in April
2016. These instalments are included in other assets (non-current)
on the AWAC consolidated balance sheet in the respective
reporting periods.

US$ MILLION

31 DEC 2016

31 DEC 2015

251.2

395.7

425.9

3,634.2

2,064.5

6,771.5

2.2

561.6

184.9

2.7

1,220.4

1,971.8

4,799.7

531.8

329.1

113.6

436.8

3,691.8

2,032.7

7,135.8

10.0

635.8

306.5

3.6

1,308.8

2,264.7

4,871.1

The other movements in other assets include an increase in
the value of deferred tax assets of approximately $33 million,
a reduction in investments of $135 million primarily due to
the sale of DBNGP and reduction in other assets due to the
$72.3 million impairment in an interest in a gas field in
Western Australia.

The reduction in other liabilities includes the $74 million
Alba settlement paid in January 2016. In accordance with the
allocation agreement with Alcoa, the payment was funded by
Alcoa as a part of its assumption of the additional 25% equity
share of the Alba settlement payments and costs. The remaining
instalment payments totalling $148 million will also be fully
funded by Alcoa.

Further movements in other liabilities include the decrease in
value of derivative contracts of approximately $53 million and
severance reserves of approximately $53 million offset by an
additional $115 million liabilities arising from the closure of
Suriname operations.

ALUMINA LIMITED ANNUAL REPORT 2016

AWAC CASH FLOW (US GAAP)

Cash from operations

Capital contributions arising from the allocation agreement1

Capital contributions from partners

Net movement in borrowings

Capital expenditure

Proceeds from sale of 20% interest in the DBNGP

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

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

(26.2)

74.0

120.0

(7.0)

(129.9)

145.0

122.3

6.8

305.0

(585.6)

(280.6)

808.9

71.2

5.9

(49.6)

(178.4)

–

(54.1)

(42.3)

561.6

(268.0)

293.6

Contributions by Alcoa in accordance with the allocation agreement whereby Alcoa assumes an additional 25% equity share relating to the Alba
settlement payment and costs.
Made up of changes to capital lease obligations, related party notes receivable and other.

Cash from operations includes the final instalment of $200 million for the 12-year gas supply agreement (2015: $300 million),
payment for the Alba settlement of $74 million (2015: $74 million) and payments relating to significant items.

Adjusting for the gas instalment and the Alba settlement, cash from operations would have been a positive $250.5 million, despite
SGA prices falling to a multi-year low during 2016. In 2016, sustaining capital expenditure was $121.1 million compared to
$171.8 million in 2015.

Significant refinery capital expenditure in 2016 included residue storage at Alumar, residue filtration at Kwinana and water
treatment at Point Comfort.

The mining business unit’s capital expenditure was $27 million in 2016, which included replacement of fleet management systems,
haul roads and tailing ponds uplift.

Growth capital expenditure for 2016 was $8.8 million compared to $6.6 million in 2015. The expenditure largely related to
digestion improvements at the Pinjarra refinery in Western Australia and production creep at Juruti.

5. ALUMINA LIMITED FINANCIAL REVIEW

ALUMINA LIMITED PROFIT AND LOSS

Share of net profit of associates accounted for using the equity method

General and administrative expenses

Finance costs

Foreign exchange losses, tax and other

(Loss)/profit for the year after tax

Total significant items after tax

Net profit after tax excluding significant items

SIGNIFICANT ITEMS (IFRS, POST-TAX)

Suralco restructuring charges and deferred tax assets adjustment

Point Comfort restructuring charges

Anglesea restructuring charges

Portland impairment charge1

Capital work in progress write-offs

Impairment in an interest in a gas field in Western Australia

Gain on sale of interest in the DBNGP

Other (includes severance and redundancy charges)

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

18.1

(25.7)

(9.1)

(13.5)

(30.2)

(114.9)

84.7

109.9

(11.9)

(6.6)

(3.1)

88.3

(169.9)

258.2

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

(57.5)

(12.4)

(1.2)

(24.7)

–

(20.2)

2.5

(1.4)

(88.4)

(34.3)

(15.4)

(20.0)

(9.2)

–

(2.6)

Total significant items

(114.9)

(169.9)

For US GAAP purposes the Portland impairment charge was fully recognised in 2016. For AAS the charge was recognised over the period of two years
2016 and 2015.

Alumina Limited recorded a net loss after tax of $30.2 million
compared to a profit of $88.3 million in 2015.

The decline in net profit was largely due to AWAC’s decline in
profitability predominantly due to the lower average realised
alumina price, which was partially offset by AWAC’s lower
charges for significant items.

The increase in Alumina Limited’s general and administrative
expenses compared to 2015 includes $14.0 million of costs
arising from the Company’s actions in relation to Alcoa’s
corporate separation.

Excluding the above costs, the remaining 2016 general and
administrative expenses were consistent with 2015.

Significant items were the result of restructuring activities to
improve the portfolio mix of AWAC. These activities included
the curtailment and subsequent closure of the Suralco mine
and refinery and curtailment of the Point Comfort refinery,
closure of the Anglesea coal mine and power station and
the sale of an interest in DBNGP.

Excluding significant items, net profit would have been
$84.7 million (2015: $258.2 million).

A change in credit rating for Alumina Limited triggered a step
up in the fixed interest rate note’s coupon from 5.5% to 7.25%
per annum, effective 20 November 2016. To reflect this, an
interest expense adjustment of A$3.5 million (US$2.6 million)
was included in finance costs.

For 2016 Alumina Limited recorded US$14.3 million of
non-cash foreign exchange losses related to the return of
capital from the Enterprise Partnership, an AWAC entity.

ALUMINA LIMITED ANNUAL REPORT 2016

ALUMINA LIMITED BALANCE SHEET

Cash and cash equivalents

Investment in associates

Other assets

Total assets

Payables

Interest bearing liabilities – non-current

Other liabilities

Total Liabilities

Net Assets

US$ MILLION

31 DEC 2016

31 DEC 2015

8.6

9.3

2,106.0

2,098.0

3.2

3.4

2,117.8

2,110.7

1.3

92.4

17.2

110.9

1.7

110.5

15.6

127.8

2,006.9

1,982.9

Alumina Limited’s net debt as at 31 December 2016 was $83.8 million.

Alumina Limited has $300 million of committed bank facilities, which expire as follows:

• $150 million in December 2017 (no amounts drawn under these facilities as at 31 December 2016).
• $150 million in July 2020 (no amounts drawn under these facilities as at 31 December 2016).

In addition to the bank facilities Alumina Limited has an A$125 million fixed rate note on issue, which matures on 19 November 2019.

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 flow1

US$ MILLION

YEAR ENDED
31 DEC 2016

YEAR ENDED
31 DEC 2015

150.2

0.7

(5.7)

(27.9)

1.1

118.4

33.9

152.3

61.4

1.5

(6.5)

(12.1)

(0.7)

43.6

41.0

84.6

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

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

Payments for suppliers and employees included $13.7 million
arising from the Company’s actions in relation to Alcoa’s
corporate separation.

Alumina Limited’s total receipts from AWAC during 2016 were
$232.8 million ($150.9 million of dividends and distributions,
and $81.9 million of capital returns).

For 2015 Alumina Limited’s total receipts from AWAC were
$106.3 million, comprised of: $61.4 million of dividends,
$43.4 million of capital returns and $1.5 million of distributions.

Alumina Limited’s cash contributions to AWAC during 2016
were $48.0 million compared to $2.4 million during 2015.

As a result, free cash flow was $67.7 million higher in 2016
compared to 2015.

6. MARKET OUTLOOK AND GUIDANCE

In 2016, global consumption of primary aluminium grew by
over 4%, with the main sectors of growth being transportation,
electrical, construction, engineering and consumer durables.
Aluminium demand growth of over 4% is expected for 2017.
Global aluminium production in 2016 grew by over 2% and
is forecast to increase by nearly 7% in 2017, reaching total
global production of almost 63 million tonnes. China
contributed almost 32 million tonnes of production in 2016.
Although LME and Chinese warehouse stocks of aluminium fell
during 2016, overall world aluminium inventories remain high
and thus likely to overhang the market during 2017. Outside
China, new aluminium production is expected to enter the
market in 2017 from India, Norway and Vietnam.

Following the oversupply of alumina around the start of 2016
which contributed to alumina prices as low as $197 per tonne,
there were significant curtailments of alumina production within
China and to a lesser extent outside China. The curtailments
tightened supply of alumina considerably and, together with
a subsequent ramping up of aluminium capacity, led to a
tighter alumina market in the second half of 2016. Various
environmental audits were introduced by the Chinese
Government, which coincided with unforeseen domestic
transport disruptions to reduce Chinese alumina production
and delivery in the second half of 2016. The global alumina
balance ended 2016 with a modest deficit and an alumina
price of $349 per tonne. Most of the currently curtailed capacity
is likely to remain idled, although some scope remains for
modest volumes to re-start if prices remain high. China, for
instance, was estimated to be running at an alumina utilisation
rate of 93% of installed capacity in January 2017.

Supply and demand for alumina are forecast to each grow
by around 7% over 2017 and be broadly balanced. Refineries
in Saudi Arabia and Indonesia are expected to ramp up to full
capacity during 2017 and a new refinery is currently under
construction in the United Arab Emirates due for completion
in 2018.

Alumina pricing in January 2017 was influenced by on-going
strong Chinese alumina demand growth, higher alumina
production costs (coal in China and caustic soda globally) and
a rally in LME aluminium prices. Following the Chinese Lunar
New Year break, there is usually a flatter period in production
and demand and a potential reduction in the world alumina
price until smelting production ramps up.

Malaysia’s bauxite mining ban has been extended until March
2017 and could be extended until 2018. New alumina
production in China may require some drawdown of Chinese
bauxite stockpiles, even with expected larger bauxite volumes
supplied to China from Brazil and Australia in 2017.

In January 2017, the Indonesian Government announced
some amendments to its January 2014 minerals export ban.
The amendments would appear to allow the export of bauxite
from Indonesia subject to a number of conditions, key amongst
them being that the exporter would need to have an alumina
refinery project approved by the Government and under
construction (and needing to meet six-monthly progress
milestones over a five-year period). This would seem to allow
some exports of higher quality bauxite ore provided that the
miners, or other refiners in Indonesia, process at least 30% of
their production using low grade ore. Foreign companies may
only own up to 49% of the refinery project. It is premature to
reliably estimate the likely impact on bauxite exports under this
new policy, pending further detail on the amendments and an
understanding of how the amendments will be interpreted and
applied in practice. There has only been one refinery
constructed in Indonesia since the ban was brought in. In any
event, it appears that some bauxite exports from Indonesia are
likely in the near to medium term.

Also in January 2017 another area of uncertainty as to the
outlook has emerged. There have been reports that the
Chinese Ministry of Environmental Protection is consulting
industry on cuts to production of energy-intensive industries for
seasonal pollution control reasons from November 2017 to
March 2018. This could include alumina and primary aluminium
and potentially lead to temporary shutdowns of up to 30% of
alumina and 30% of aluminium production in the provinces
of Shandong, Hebei, Henan and Shanxi over that period. Also
unclear is whether this would be a one-off exercise or intended
to be an annual requirement.

Over the medium to longer term, AWAC’s bauxite production
costs are expected to remain relatively stable compared with
the imported bauxite costs of Chinese merchant refiners. By
2025, the annual share of Chinese alumina production based
on imported bauxite is expected to increase to 120 million
tonnes from the 2016 total of 52 million tonnes. For these
bauxite needs, it is expected that from around 2020, new and
large greenfields mines outside China will be increasingly
required to feed China’s growing needs.

ALUMINA LIMITED ANNUAL REPORT 2016

AWAC GUIDANCE

The following 2017 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

Production – alumina

Production – aluminium

Bauxite third party committed sales

Alumina Price Index sensitivity1: +$10/t

Caustic price sensitivity: +$100/dry metric tonne

Australian $ Sensitivity: +1¢ in USD/AUD

Brazilian $ Sensitivity: +1¢ in BRL/USD

2017 GUIDANCE

Approximately 12.6 million tonnes

Approximately 120,000 tonnes

Approximately 6.8 million tonnes

Approximately +$100 million EBITDA

Approximately -$90 million EBITDA

Approximately -$20 million EBITDA

Minimal impact

SGA shipments expected to be based on alumina price indices or spot

Approximately 85% for the year

AWAC sustaining capital expenditure

AWAC growth capital expenditure

AWAC Point Comfort after tax restructuring2

Charges (IFRS)

Cash Flows

AWAC Suralco after tax restructuring2

Charges (IFRS)

Cash Flows

AWAC Point Henry and Anglesea after tax restructuring2

Charges (IFRS)

Cash Flows

Approximately $140 million

Approximately $85 million

Approximately $35 million

Approximately $50 million

Approximately $10 million

Approximately $30 million

Approximately $1 million

Approximately $40 million

1. Excludes equity accounted income/losses for the Ma’aden joint venture.
2. Ongoing costs will be recognised in future financial years relating to the curtailments and closures.

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 2017 are that total receipts by Alumina Limited should exceed its
corporate needs.

In 2017, 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 THE COMPENSATION committee

Dear Shareholders,

It gives me pleasure to present Alumina’s 2016 remuneration
report. The annual report has highlighted that 2016 has been
a year of transformation for your company.

In the past, the limitations of the old AWAC joint venture structure
were very real and hampered Alumina’s autonomy and strategic
options. Our small executive team worked on many ideas to
reshape the joint venture. However, in September 2015 when
Alcoa Inc. announced their intended company separation, there
was a catalyst for change. Throughout 2016, facing the prospect
of the substitution of a quite different joint venture partner to
replace the formerly unified Alcoa, the team worked tirelessly
to protect Alumina’s shareholders’ interests and to develop and
pursue strategies to strengthen the Company’s position. Whilst
the board considered carefully the risks of particular negotiating
strategies, Alumina’s CEO and senior executives built and
positioned our case, and developing and crystallising options
as negotiations ebbed and flowed. Without any doubt, the
final achievement has strengthened the relationship with Alcoa
Corporation and enabled Alumina Limited to participate
significantly in decisions determining the growth of AWAC in
the short term and allowed for more positive developments
of the joint venture in the future.

In the course of the year, the Compensation Committee
re-considered whether Alumina’s remuneration tools remained
appropriate. The Committee concluded that a combination
of the company’s Short Term Incentives (STI) and Long Term
Incentive (LTI) schemes remained structurally appropriate but
that the rewards could only be decided when shareholders
could readily identify and value the achievements too.

For the 2016 STI determinations, the Compensation Committee
tested the scorecard for performance against all elements. Then
it considered the quantum of rewards in the context of returns to
shareholders in the year. The Company’s 2016 financial result
was a US$30.2 million loss (which after excluding significant
items was a $84.7 million profit). However returns to shareholders
through dividends and share price performance was strong
during the year. The Committee’s view of value created as a
result of the company transformation was aided by positive
feedback from shareholders. In the Committee’s judgement, the
achievements of the senior executive team were so significant
that it recommended to the Board uplifts to the 2016 STI scorecard
results based on each executive’s role in the transformation

and, their specific and demonstrable achievements. The
transformation of the Company was an exceptional achievement
not anticipated by the design of the STI framework. Accordingly,
the 2016 STI payments exceeded the designed maximum
benefits of our scheme.

In particular, I am pleased that the board recognised the CEO
and the company’s General Counsel and Company Secretary
for their skilful navigation and delivery of shareholder benefits
ranging from improved access to cash, enhanced decision
making rights, governance disciplines and an unimpeded
platform for future strategic partnerships. The CEO received an
STI payment of $725,000 and General Counsel and Company
Secretary $500,000 for their efforts and outcomes.

On other remuneration matters:-

• The Company’s continued share price growth of 58 per cent

over the year triggered 2016 LTI vesting.

• Having kept executives’ Fixed Annual Remuneration (FAR) flat
in 2016, and drawing on market data, their FAR will increase
by 2.5% in 2017.

• Non-Executive Director (NED) fees have not increased since

2011. The Compensation Committee has introduced a policy
to review fees every other year, but with judgements still
made in the context of company performance. This work
considered ongoing workloads with these main conclusions
– in 2017, our Chairman’s fee will increase from $375,000
to $410,000p.a., Committee chairmanship fees will be aligned
with market practice and NED base fees will remain unchanged.

Finally, our CEO has moved into his fourth year of employment
and delivered significant value for shareholders in his period of
continued service. As a result, the Compensation Committee
recommended to the Board that the share rights in his FAR
(which aligns his base pay with shareholder experience) should
remain subject to a three year holding lock, but vest after six
months for the 2017 grant rather than eighteen months.
This will allow for more flexibility in an eventual succession.

I look forward to your continued support and welcome
discussion on the report.

Emma Stein Chair

ALUMINA LIMITED ANNUAL REPORT 2016

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 2016.

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
exclude the Chief Executive Officer (CEO).

CONTENTS

The Remuneration Report is presented in the following sections:

REMUNERATION POLICY & FRAMEWORK
1.1

Persons covered by this report

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

COMPANY PERFORMANCE & EXECUTIVE REMUNERATION OUTCOMES
2.1

Remuneration decisions and outcomes for 2016

2.1.1 Performance under the STI

2.1.2 Performance under the LTI Plan

2.1.3 Alumina Limited’s Remuneration Governance Framework

2.1.4 Other Remuneration Matters

2.2

2.3

Senior Executive remuneration

Executive KMP remuneration and equity granted in 2016

2.3.1 Executives’ Service Agreements

NON-EXECUTIVE DIRECTORS’ REMUNERATION
3.1

Remuneration Outcomes

3.2

Non–Executive Director share holdings

36
36

40
42

58
58

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

Non-Executive Chairman

Appointed Chairman 1 December 2011
(director since 8 June 2007)

Emma Stein

Chen Zeng

Peter Day

Mike Ferraro

Executive Director

Peter Wasow

Other KMP

Chris Thiris

Stephen Foster

Andrew Wood

Non-Executive Director

Appointed 3 February 2011

Non-Executive Director

Appointed 15 March 2013

Non-Executive Director

Appointed 1 January 2014

Non-Executive Director

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. AWAC is a large capital-intensive
business operating in a number of jurisdictions, some in remote
locations. Alumina Limited’s executives are responsible for
protecting and advancing the interests of its 53,000 shareholders
in actions undertaken to manage the AWAC portfolio of assets.
This was never more evident than in 2016 when the Company’s
joint venture partner Alcoa Inc. (Alcoa) pursued a process to
separate itself into two separate entities.

Prior to separation, Alcoa owned 60 per cent of the AWAC joint
venture and additionally, was responsible for AWAC’s operational
management. Post separation, that ownership of the AWAC
assets would be (and now is) held by a new entity, Alcoa
Corporation. Alumina Limited is invested solely in the AWAC
joint venture and is bound to protect its interest and rights in
the joint venture on behalf of its shareholders. Alcoa’s planned
separation raised concerns that the change may disadvantage

Alumina Limited and trigger certain joint venture rights. As a
result Alumina Limited’s management engaged in detailed
negotiations with Alcoa to protect the interest of Alumina
Limited’s shareholders.

This matter intensified when Alcoa initiated legal action seeking
declarations regarding Alumina Limited’s rights under the joint
venture agreements in the context of the Alcoa separation. In
September 2016, an agreement was finally concluded resulting
in substantive changes to the AWAC joint venture and the
litigation was terminated. This agreement included a reshaped
joint venture in which Alumina Limited has enhanced decision-
making rights, improved access to cash flows from the
underlying business, greater flexibility and more strategic
options. The joint venture change was a once in a generation
event and the result of a year-long process that included several
months of litigation and substantial effort on behalf of Alumina
Limited’s management.

In 2016 the Board also specifically directed the CEO and
Senior Executives with maintaining Alumina Limited’s financial
metrics consistent with investment grade rating, maximizing cash
flow from AWAC 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.

ALUMINA LIMITED ANNUAL REPORT 2016

REMUNERATION IN BUSINESS CONTEXT
Alumina Limited’s Executives are charged with delivering on Alumina’s business strategy

Influencing AWAC’s
strategy, competitive
position and options

Maximising cash flow
from AWAC and
maintaining Alumina
Limited’s investment
grade balance sheet
and metrics in a highly
cyclical industry

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 executives who are highly commercial,
strategic and have tactical experience, and

• Be competitive in a market context.

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 fixed annual remuneration (FAR) and Long Term
Incentive (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, Short Term Incentive (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.

FIXED ANNUAL REMUNERATION (FAR)

• Set to attract, retain and motivate the right talent to
deliver on the Company’s strategy. The Board takes
in to account individual performance, skills, expertise
and experience as well as external benchmarking
to determine executives’ fixed remuneration.

‘AT RISK’ REMUNERATION (STI AND LTI)

• The ‘at risk’ components are based on performance
against key financial, commercial and strategic
measures that are linked to generating satisfactory
returns for shareholders. The STI scorecard is a vehicle
for aligning executives with Company priorities as
agreed by the Board and hence is part of a performance
management discipline. 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.
The performance measures adopted are relative TSRs
to recognise that Alumina Limited must out-perform
relative to other investment choices.

• More detail on the ‘at risk’ remuneration components
and their link to company performance is included in
section 2 of this report.

REMUNERATION COMPONENTS

1.2.2
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
(FAR)

(delivered through
cash and equity (share
rights) for the CEO
and through cash for
other executives)

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

Considerations:

• Individual’s role and responsibilities
• Depth of knowledge and skill set
• Level of expertise and effectiveness
• Market benchmarking

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:

• Cash flow from AWAC is fundamental to

• Free Cash flow
• Investment rating

Strategic and individual objectives

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.

• 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.

Long-term Incentive
Plan (LTI)
(delivered as equity
in the form of
performance rights
(Performance Rights))

Personal Scorecard (50% of STI Award)

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

• Delivery on commercial and financial projects
and contracts that aid AWAC’s and Alumina
Limited’s performance and attribute costs fairly
to the equity owners.

Three year Company TSR performance equal to
or outperforming 50 per cent of the two comparator
groups results (half of the LTI is attributable to
each group).

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

• A result below 50 per cent for a group will not
result in an award of equity to the Company
participants for that half of the LTI.

• Linked to long-term business strategy and

focuses executives on key performance drivers
for sustainable growth.

• Links rewards of participants in the LTI plan

to the experience of the shareholders.

ALUMINA LIMITED ANNUAL REPORT 2016

CEO AND SENIOR EXECUTIVES REMUNERATION MIX AND COMPARABLES

1.2.3
Remuneration Mix Overview

The CEO and Senior Executives share the same remuneration principles. However, there are differences in the structures and relativities.

In setting the CEO and Senior 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 2016 TOTAL OPPORTUNITY REMUNERATION MIX

53%

FIXED (FAR)

53%
Fixed annual remuneration (FAR)

FAR Conditional rights (equity)

STI maximum (cash)

19%

AT RISK

AT RISK
19%

LTI at face value (equity)

19%

Fixed annual remuneration (FAR)

FAR Conditional rights (equity)

STI maximum (cash)

LTI at face value (equity)

SENIOR EXECUTIVES1 2016 TOTAL OPPORTUNITY REMUNERATION MIX

48%

FIXED (FAR)

33%

AT RISK

48%
Fixed annual remuneration

STI maximum (50% cash)

33%

STI maximum (50% equity)2

LTI at face value

19%

Fixed annual remuneration

STI maximum (50% cash)

STI maximum (50% equity)2

LTI at face value

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.

2. Under the terms of the STI rules, Senior Executives (other than Mr Wood) are required to apply 50 per cent of their after tax STI award in purchasing shares

that must be held for three years.

CEO

The CEO’s 2016 ‘at target’ remuneration package is significantly
different to the ‘at target’ profile of the previous CEO:

• The CEO’s remuneration has a higher weighting to fixed
remuneration, reflective of the fact that his STI and LTI
opportunity have been substantially reduced when compared
to his predecessor.

• 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’.

• The CEO’s fixed remuneration also includes an annual share
right component. As mentioned in the letter by the Chair of
the Compensation Committee the share rights are subject to
a service condition, and if satisfied, are deferred for three
years from the date of grant. This component of the CEO’s
pay is therefore subject to share price fluctuations.

• 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 remained unchanged for

2016 when compared to the previous year.

The Board is satisfied that the CEO’s target remuneration is
appropriate for Alumina Limited, as a non-operating partner of
the AWAC joint venture (and his total opportunity is very modest
at the 4th percentile when compared to peers of the ASX51–100).
That said, the bauxite, alumina and aluminium industry is global,
complex and dynamic. Moreover in 2016, Alumina Limited’s
CEO led and successfully concluded the Company’s
negotiations with Alcoa, reshaping the joint venture and lifting
Alumina Limited’s standing within it. So, as detailed further in
section 2.1 of this report, his 2016 awarded remuneration
reached the 18th percentile ranking within the ASX51–100,
which in the circumstances, and with reference to the enhanced
shareholder value unlocked, the Board does not consider to
be excessive.

ASX51–100 TOTAL AWARDED REMUNERATION 2016 ($M)1

75th

Median

25th

Wasow
(18th)

$0m

$1m

$2m

$3m

$4m

$5m

$6m

1. Data valid for 12 months to 30 June 2016.

2. COMPANY PERFORMANCE & EXECUTIVE REMUNERATION OUTCOMES

Tough market conditions prevailed in the first half of 2016
which witnessed a decline in alumina prices over the period
of 33 per cent. However, despite the challenging market, the
progressive strategy of restructuring AWAC’s asset portfolio and
a focus on cost cutting within AWAC resulted in a solid financial
performance. At the same time, considerable management
resources were dedicated to pursuing the Company’s rights
in the AWAC joint venture stemming from Alcoa’s proposed
separation into two separate entities. Senior management
vigorously sought to protect its rights in the timeframe imposed
by the Alcoa separation process and legal action taken by
Alcoa. In the second half of 2016, management’s diligence
and endeavour resulted in amended terms of the AWAC joint
venture agreements which resulted in meaningful
transformational benefits that include:

• Improved control over the investment in AWAC (via enhanced

governance rights) and improved capital efficiency

• Increased strategic flexibility and autonomy as a corporate
entity via termination of exclusivity provisions and increased
opportunity for development of projects and expansion and
offtake rights for bauxite and alumina on a change of
control situation.

These outcomes are the most transformational and commercially
significant changes in Alumina Limited’s business since the
formation of AWAC in 1995. The removal of the “poison pill”
resulting from exclusivity provisions in the joint venture agreements
and transforming the Company’s rights in the joint venture have
unlocked significant long-term value. The changes also provide
greater certainty and control of the cash flows from AWAC
including the potential for access to product. There was an
immediate recognition by the investors of the potential benefits
of the changes to the joint venture agreements with the Company’s
share price rising approximately 15 per cent in the 48 hours
following the announcement.

The second half of the year also benefited from a rising alumina
price. However, AWAC’s decision to close its alumina refinery
and bauxite mines in Suriname, which have been fully curtailed

since November 2015, resulted in restructuring-related charges,
after tax, to Alumina Limited of $57.5 million. Alumina Limited
had a statutory loss of US$(30.2) million (a decrease of $118.5
million compared to the previous year) including restructuring
related charges. Without those restrucuring-related charges,
Alumina Limited would have reported a profit of US$84.7 million.
Earnings per share were negative US1.0 cents in 2016,
(US3.1 cents in 2015). AWAC distributed US$150.9million
in dividends and distributions and Alumina Limited distributed
a 4.7 US cents per share dividends to shareholders.

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

ALUMINA FY16 TSR VS ASX indices 2016 (A$)

Announce amendments
to AWAC joint venture

E
G
N
A
H
C
E
G
A
T
N
E
C
R
E
P

180

160

140

120

100

Jan

Feb Mar

Apr May

Jun

Jul

Aug

Sep Oct Nov

Dec

Alumina Ltd. TSR (incl. franking credits)
ASX100 Accumulation
ASX200 Materials Accumulation Index

ALUMINA FY16 SHARE PRICE PERFORMANCE VS ASX INDICES (A$)

Announce amendments
to AWAC joint venture

E
G
N
A
H
C
E
G
A
T
N
E
C
R
E
P

180

160

140

120

100

Jan

Feb Mar

Apr May

Jun

Jul

Aug

Sep Oct Nov

Dec

Alumina Ltd.

All Ordinaries Index

ASX100 Index
ASX200 Materials Index

ALUMINA LIMITED ANNUAL REPORT 2016

HISTORICAL COMPANY PERFORMANCE

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

Dividends declared per
share (US cents per share)

Percentage change
in share price

Market Capitalisation
(US$million)

2016

(30.2)

6.0

2015

88.3

6.3

58%

-35%

2014

(98.3)

1.6

61%

2013

0.5

–

2012

(55.6)

2011

126.6

–

6.0

20%

-21%

-55%

3,802

2,418

4,114

2,789

2,282

2,782

Net debt ($million)

83.8

101.2

86.6

135.2

664.4

471.6

REMUNERATION INDICATORS

Per cent increase in fixed remuneration1

Per cent short-term incentive2

Per cent long-term incentive2

2016

Nil

64%

23%

2015

3.50%

38%

23%

2014

3.00%

40%

10%

2013

3.80%

22%

2012

3.00%

41%

Nil

1. Percentage is calculated by reference to FAR as at 31 December in the stated financial year relative to FAR as at 31 December in the immediately preceding

financial year.

2. Represents the average of total ‘at risk’ incentives expressed as a percentage of FAR applicable to Senior Executives and the CEO.

2.1.REMUNERATION DECISIONS AND OUTCOMES FOR 2016

TABLE 2

FIXED REMUNERATION

2016 outcomes

SHORT TERM INCENTIVE

As disclosed in last year’s report, to reflect the challenging market conditions, the fixed remuneration for the
CEO and Senior Executives did not increase for 2016.

2016 outcomes

Corporate Scorecard

In 2016, STI payments exceeding the maximum opportunity were awarded to the CEO and Senior Executives.

The catalyst for these payments was the landmark outcome and effort required in transforming the foundational
joint venture agreements and relationship between the Company and Alcoa, its joint venture partner.

At the beginning of the year, overall the renegotiation project was given a scorecard weighting of 37.5 per cent
in recognition of the likely importance of the project. At the same time, the Compensation Committee
emphasised to senior management that meaningful shareholder value was a pre-requisite for 2016’s STI awards.

At the end of the year, the Committee assessed performance on each element of the scorecard (Corporate
and Individual), with most financial and commercial targets met. The exceedance of targets relating to the
joint venture restructuring option and Alcoa separation meant the resultant average score was 107 per cent
of target or 83 per cent of the maximum STI award. Having used its discretion, using the uplift factors, the
Board’s final awards ranged from maximum to 138 per cent of maximum for executives (other than the
CEO) reflecting their relative contribution to the restructuring outcomes.

In addition, the Committee concluded that:

• the outcome of the joint venture renegotiation had created immediate shareholder value in terms

of a share price uplift and through greater certainty and control of cash flows from AWAC

• the protection measures developed to address changes brought about by Alcoa’s separation were

the most significant in the history of the Company.

• the joint venture renegotiation had successfully and fundamentally transformed Alumina Limited.

The renegotiation project exceeded target and was considered such a pivotal change that the STI
framework for measuring its impact was not sufficient

• the significance of the once in a generation event and the transformative outcome of the joint
venture re-negotiation was deserving of an uplift to the scorecard results for Mr. Wasow and in
varying degrees, to the Senior Executives. The uplift factors ranged from 1.2 to 2.1 across the KMP,
judged by role and specific achievements. This resulted in awards above the scorecard maximum,
with the CEO and General Counsel and Company Secretary receiving meaningful uplifts.

Mr. Wasow’s STI payment of $725,000 (compared with $414,000 maximum on a scorecard basis)
recognised his key role in directing the project to a successful outcome, his critical strategic and tactical
decisions. He was crucial in resolving negotiations with Alcoa on the fundamental joint venture agreements
that have remained virtually intact since 1995.

An independent benchmarking assessment was conducted to crosscheck whether his award was appropriate.
The benchmarking was against CEO remuneration in peer group companies in the ASX51–100 and also
against a select group of companies that performed strongly in 2016. The analysis indicated that in regard
to Mr. Wasow:

• his STI maximum opportunity, in dollar terms , is the lowest in the ASX51–100
• even taking into consideration the uplift provided, Mr Wasow’s final STI award fell at the 36th

percentile & his total awarded remuneration ranked 18th

• his total remuneration opportunity remains amongst the lowest in the ASX51–100

Mr Wasow was due to receive approximately $339,000 in STI payment compared to his maximum of
$414,000 however the Board exercised its discretion in recognition of his critical contribution to the
transformation project.

The Board was satisfied that Mr. Wasow’s final award is not ‘excessive’ in the context of the market
and the exceptional outcomes achieved.

For a detailed summary of performance against the Corporate Scorecard see page 44.

ALUMINA LIMITED ANNUAL REPORT 2016

SHORT TERM INCENTIVE CONTINUED

Personal Scorecard

LONG TERM INCENTIVE

2016 outcomes

In 2016, 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 45

In total, in 2016, Alumina Limited’s STI scheme paid $1,910,000 to its KMPs, which was an increase
of $784,000 on 2015’s level.

Net Profit/(Loss) after tax excluding significant items

The reported full year net loss after tax of US$(30.2) million however, excluding significant items would
be US$84.7 million.

In 2016, in line with the policy outlined in the 2015 Remuneration Report, when calculating STI outcomes
the Board determined to exclude costs associated with the curtailment of Point Comfort and charges associated
with the closure of the Suralco operations 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 46.

Two tranches of Performance Rights were tested in 2016, Performance Rights granted in 2013 (retesting)
and Performance Rights granted in 2014 (first and final test).

In relation to the year 2013 grant, 98 percent of the Performance Rights tested against the International
Comparator Group vested on the initial test conducted in December 2015. The remaining 2 percent of
Performance Rights pertaining to the International Comparator Group vested as a result of the first retest in
June 2016. For the Performance Rights tested against the ASX Comparator Group (ASX component), none
vested at the initial test held in December 2015. Approximately 66 percent of the ASX component tested
at the first retest in June 2016 vested and the remainder vested at the second retest in December 2016.
The 2013 year grant was the final tranche subject to retesting. For Performance Right grants from 2014
onwards, retesting has been abolished.

In relation to the year 2014 grant, 100 percent of the Performance Rights vested as a result of the Company’s
TSR performance exceeding the maximum vesting criteria of the 75th percentile result of both the ASX and
International Comparator Groups.

The ASX Comparator Group consists of Australian listed entities in the S&P/ASX 100 excluding Property
Trusts and Alumina Limited; and excluding the top 20 companies by market capitalisation.

The International Comparator Group for Performance Rights tested in 2016 consisted of:

• United Company Rusal
• Shandong Nanshan Aluminium
• Hindalco Industries
• Norsk Hydro
• Century Aluminium
• Aluminium Corporation of China
• Noranda Aluminium Holdings
• Alcoa1

1. Alcoa Inc. split into two publicly-traded independent companies, Arconic Inc. and Alcoa Corporation, effective 1 November 2016. The TSR result for Alcoa
was independently determined by Mercer Consulting based on a combination of the TSR of Alcoa Inc. up to 31 October 2016, and on the combined TSR
of Arconic Inc. and Alcoa Corporation from 31 October 2016. As mentioned in the 2016 Remuneration Report, in 2015 the Compensation Committee
conducted a rigorous review of the applicability of the companies in the International Comparator Group. Refer to Table 5 on page 49 for further detail
on the composition of the International Comparator Group for the 2016 grant.

2.1.1 PERFORMANCE UNDER THE STI PLAN
Tables 3 and 4 below provide a summary assessment of performance against STI performance measures for 2016.

TABLE 3 CORPORATE SCORECARD – 50% OF POTENTIAL STI AWARD

SHORT-TERM DRIVERS

PERFORMANCE MEASURES

PERFORMANCE RESULT AND ASSESSMENT

Financial objectives,
Cash flow (20% weighting)

Achieve 2016 cash flow distributions
from AWAC in excess of minimums required
under the joint venture agreements.

Investment rating and gearing
(5% weighting)

Maintain key financial metrics consistent
with investment grade credit rating:
(i) Funds from operations/debt >50%
(ii) Debt / EBITDA<2 times.

At target

Distributions of US$232.8 million received
during 2016.

Below target

Funds from operations/total debt 214%.
Full year forecast for Net debt/EBITDA is
0.5 times, however the investment grade
rating was lost due to Alcoa Corporation’s
credit rating decline.

Strategic objectives

• improving long term cost curve

Demonstrable progress on WA
Energy strategy:

positioning and options

Develop gas strategy post appraisal drilling.

At target

• preserving shareholder interests
(5% weighting)

(30% weighting)

Deliver a joint venture restructuring option

Surpassed target

(5% weighting)

Elevate Strategic Council membership
to most senior corporate level in Alcoa.

Project successfully completed.

At target

Alcoa Corporation’s CEO/CFO/COO are
the Alcoa Strategic Council representatives
thereby elevating the organisational level at
which the relationship is conducted.

(20% weighting)

(15% weighting)

Achieve reasonable resolution of Alumina
Limited’s position in relation to Alcoa’s
separation into two entities.

Surpassed target

Project successfully completed.

Complete detailed negotiations on alumina
sales agreement to Alcoa and develop market
monitoring mechanism to determine prices
semi-annually and develop contract
administration capability relevant to Alumina’s
position under that sales agreement.

At target

A favourable agreement has been reached
with terms being agreed with Alcoa
Corporation. Alcoa Corporation now
purchases alumina from AWAC at API.

ALUMINA LIMITED ANNUAL REPORT 2016

TABLE 4 PERSONAL OBJECTIVES – 50% OF POTENTIAL STI AWARD (THE APPLICATION OF PERSONAL OBJECTIVES VARY FOR
EACH EXECUTIVE)

PERFORMANCE MEASURES

PERFORMANCE RESULT ASSESSMENT

Resolve specific sales contract matters.
(15% weighting)

At target

Agreement reached with a payment due to
AWAC from Alcoa.

Hold Alumina Limited costs flat to 2015.

At target

(10% weighting)

Implement process and information gathering in relation to treatment
of pre-existing liabilities at the Point Comfort refinery.

(10% weighting)

Achieved, excluding expenses directly related in
activities to finalise the joint venture restructure

At target

Alcoa engaged, data gathering underway
and progressing according to plan.

Protect Alumina’s rights in Suriname closure and that pre-existing
liabilities are correctly allocated.

At target

Progressing according to Plan.

(15% weighting)

Review and where appropriate amend financial exposures to the
demerged company in relation to cash management, trade credit,
guarantees and credit support.

At target

Achieved.

(15% weighting)

Ensure AWAC is not disadvantaged on AWAC related party matters
or portfolio restructuring (such as the sale of AWAC assets).

(15% weighting)

Verify intercompany charges for AWAC and related party transactions
with Alcoa and isolate separation costs

(5% weighting)

Resolve the treatment of certain Alcoa Brazilian alumina tonnage

(15% weighting)

Surpassed target

Achieved.

At target

Achieved.

At target

Achieved.

NET (LOSS)/PROFIT AFTER TAX EXCLUDING SIGNIFICANT ITEMS
The Board established two priorities for management in 2016:

• was the matter within management’s control (for example,

was it a legacy matter).

1. AWAC portfolio rationalisation

2. changes to the AWAC joint venture agreements and
protection structures and mechanisms in relation to
Alcoa’s planned separation.

Both of those items required management to engage closely
with Alcoa regarding the execution of closures, curtailments,
and divestments and the planned transfer of AWAC assets and
responsibilities to a proposed new Alcoa entity. The second item
also required the engagement of legal and specialist
contractors in both Australia and the US.

In 2016, restructuring of the AWAC asset portfolio continued
with the announcement of the closure of the Suralco alumina
refinery in Suriname resulting in equity accounted restructuring
charges of US$57.5 million. The sale of Suralco and the
curtailment of 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.

TSR PERFORMANCE RESULTS FOR THE YEARS 2012 TO 2016

• the Audit and Risk Management Committee’s review

of these matters.

In 2016, after consideration of the above factors and in line
with the policy outlined in the 2015 Remuneration Report, when
calculating STI outcomes the Board determined to exclude costs
associated with the curtailment of Point Comfort and charges
associated with the closure of the Suralco operations 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.

2.1.2 PERFORMANCE UNDER THE LTI PLAN
In 2016, LTI Performance Rights vested to eligible participants
due to meeting the performance testing criteria for grants issued
in 2013 and 2014. The remainder of the 2013 grant, initially
tested at the conclusion of the three year test period in December
2015, was subject to retesting in June and December 2016. At
the June test, performance against the International Comparator
Group resulted in full vesting. At the December test, performance
against the ASX Comparator Group resulted in full vesting.

In relation to the three year (and only) testing of the 2014
Performance Rights conducted in December 2016, Alumina Limited’s
TSR performance exceeded the 75th percentile of both comparator
groups, triggering full vesting of those Performance Rights.

Retesting was abolished for Performance Rights grants from
2014 onwards.

Percentile ranking of TSR against ASX Comparator Group

Percentile ranking of TSR against International
Comparator Group

Percentage of total remuneration relating to vested LTI5

2016

2015

2014

2013

2012

761
852

1003

844

37%

35
48

15%

Nil

1. TSR percentile ranking of approximately 76 is applicable to Performance Rights granted in 2013 under the ESP against the ASX Comparator Group, performance
period 8 December 2012 to 7 December 2016 (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 85 is applicable to Performance Rights granted in 2014 under the ESP against the ASX Comparator Group,

performance period 7 December 2013 to 6 December 2016, 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 100 is applicable to Performance Rights granted in 2013 under of the ESP against the International Comparator Group,
performance period 8 December 2012 to 7 June 2016 (first 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 2013 International Comparator Group was against a comparator of seven aluminium or alumina companies listed on overseas exchanges.
The International Comparator Group was reduced to 7 companies due to the suspension from trading on 29 September 2015 of Shandong Nanshan.
Although being listed at the calculation date of 7 June 2016, Shandong Nanshan was excluded for the purposes of testing due to its period on non-trading.

4. TSR percentile ranking of approximately 84 is applicable to Performance Rights granted in 2014 under of the ESP against the International Comparator
Group, performance period 7 December 2013 to 6 December 2016, 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 2014 International Comparator Group was against a comparator group of eight aluminium or alumina companies listed on
overseas exchanges. Shandong Nanshan was reinstated (and China Hongqiao excluded) due to Shandong Nanshan resuming trading and representing a
more meaningful measure than China Hongqiao, primarily due to Shandong Nanshan’s superior free float percentage and trading volume. Refer to page
49 for further detail.

5. Represents the average applicable to senior executives.

ALUMINA LIMITED ANNUAL REPORT 2016

2.1.3 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.

• Approve 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.

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 2016, no remuneration recommendation, as defined in the
Corporations Act, was received.

2.1.4 OTHER REMUNERATION MATTERS
Clawback Policy

Alumina Limited has 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.

The Board also may seek to recover gains from the sale or
disposition of vested shares and determine to cancel unvested
equity awards.

Change of Control

In the event of a change in control, the Board may bring
forward the testing date for the LTI 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.

Cessation of Employment

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 LTI plan
rules to determine, within two months of employment ceasing,
that any of the remaining unvested Performance Rights
are forfeited.

Rights issues

Share Trading And Hedging Prohibitions

If a rights issue occurs, the Trustee will seek instructions from the
participants in the Plan, regarding how to deal with them. If no
instructions are received, the Trustee will sell the relevant rights,
proceeds (sale price net of any charges) of which will be used to
pay the participant.

In relation to any remaining unvested Performance Rights that
do not lapse and are not forfeited, they will continue on foot
under the LTI plan rules and be tested for vesting in the normal
way unless the exercise period is shortened or the Board in its
discretion determines that any or all performance conditions in
respect of all or some of the Performance Rights will be tested
at a date determined by the Board or waived, and/or cash
settlement amounts will be paid in respect of Performance
Rights that vest and are exercised.

Performance Rights granted under Alumina Limited’s LTI plan
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.

2.2 SENIOR EXECUTIVE REMUNERATION

TABLE 5
This section outlines how the STI and LTI ‘at risk’ components of executive remuneration operate.

2016

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Description

• 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). Each
Performance Right that vests delivers to the holder 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).

Performance Period

Financial Year

Three years

Performance levels

Level of
Performance

Percentage
of FAR

Below expectations

0% received

At Target

Mr Wasow

$310,500

Mr Thiris

Mr Foster

Mr Wood

56%

35%

Mr Wasow

$414,000

Mr Thiris

Mr Foster

Mr Wood

70%

50%

Maximum
(with discretion
to be adjusted
annually)

• The CEO Performance Right entitlement

is limited to a maximum benefit of up to $414,000
equivalent in Alumina Limited shares (which, valued
at grant date, is 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 value of the 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 LTI plan for the relevant year, in order to determine
the number of Performance Rights to be offered.

ALUMINA LIMITED ANNUAL REPORT 2016

2016

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Performance hurdles • Based on a scorecard comprising of

• Alumina Limited’s performance is tested using relative

corporate (50 per cent weighting) and
personal (50 per cent weighting) 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 44 and 45.

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 which are alternative investments for the
Company’s shareholders, excluding the Company, the
top 20 companies by market capitalisation and property
trusts. This test is applied to half of the LTI award.

(Test 2 – International Comparator Group) reflecting
the Company’s direct competitors in the market
comprising 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 half of the LTI award.

• In determining the companies that comprise the

International Comparator Group, consideration is
given to individual companys’ free float or liquidity in
their shares for realistic performance measurement.
As disclosed in last year’s report (following a rigorous
review by the Compensation Committee in 2015),
the initially approved comparator companies for the
International Comparator Group for LTI grants from
2016 onwards was Alcoa, South32 (new), Chalco,
Hindalco Industries, Norsk Hydro, Century Aluminium,
Yunnan Aluminium (new) and China Hongqiao (new).

• China Hongqiao was introduced to replace Shandong
Nanshan which had previously been included in the
International Comparator Group but was initially
excluded on the basis that Shandong Nanshan had
temporarily ceased trading at the time. However, for
grants from 2017 onwards, Shandong Nanshan has
been reinstated (and China Hongqiao excluded) due to
Shandong Nanshan resuming trading and representing
a more meaningful measure due to superior free float
percentage and trading volume.

• The Board considers the reasonableness of the

International Comparator Group each year and due to
the limited number of relevant companies against which
to test on a like basis Alumina Limited’s performance,
believes that the eight companies currently comprising
the comparator group remains appropriate.

2016

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

Performance assessment

The Compensation Committee reviews individual
performance against the scorecard at year-end,
taking into account actual performance outcomes
and internal and external factors that may have
contributed to the results. The Compensation
Committee receives a report from the CEO
detailing:

• financial targets and underlying assumptions.
• key activities underpinning each non-financial

objective.

• management commentary around key factors

and management decisions leading to
performance outcomes.

• individual performance objectives and indicative

performance.

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.

Percentile ranking
(in the relevant
comparator group)

Percentage of
annual vesting of
Performance Rights
in the relevant half
of the LTI award

Below 50th percentile

0% vesting

Equal to 50th
percentile

50% vesting

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

Between 50th &
75th percentile (ASX
Comparator Group)1

An additional 2%
of awards for each
percentile increase

• 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.
• if an element was achieved and surpassed.
• 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.

Equal to or greater
than 75th percentile

100% vesting

Following testing, any
Performance Rights
that have not vested
will lapse.

1. If the Company’s TSR performance is equal to that of

any entity (or security) 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 half of the LTI
award that vest will be equal to the vesting percentage
assigned by the Board to that entity (or security). 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 half of the LTI award that vest will be
determined on a pro-rata basis relative to the vesting
percentages assigned

2016

Retesting

Entitlements and benefits

ALUMINA LIMITED ANNUAL REPORT 2016

KEY FEATURES OF THE STI PLAN

KEY FEATURES OF THE LTI PLAN

• Not applicable.

Retesting has been abolished in respect of
Performance Rights issued from 2014 onwards.

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

2.3 EXECUTIVE KMP REMUNERATION AND EQUITY GRANTED IN 2016

The following tables contain the components that form the total statutory remuneration paid in 2016 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 2016

KMP

YEAR

FAR1

SHORT-TERM BENEFITS

Non-
Monetary3

STI2

POST-
EMPLOYMENT
BENEFITS

SHARE BASED PAYMENTS

Other4

Total

Super-
annuation5

Performance
rights6

FAR1

TOTAL
REMUNERA-
TION

Total

Peter Wasow
(CEO)

Chris Thiris
(CFO)

Stephen Foster
(General
Counsel/
Company
Secretary)

Andrew Wood
(Group
Executive
Strategy and
Development)

Total Executive
remuneration

2016

1,170,838

725,000

29,676

21,997

1,947,511

19,462

207,000

310,856

517,856

2,484,829

2015

1,171,254

375,000

30,661

10,344

1,587,259

19,046

213,205

217,109

430,314

2,036,619

2016

656,458

485,000

23,278

5,484

1,170,220

34,942

2015

656,454

368,000

25,839

–

1,050,293

34,946

2016

483,500

500,000

18,917

15,966

1,018,383

33,000

2015

492,935

275,000

24,866

–

792,801

23,565

2016

345,038

200,000

9,087

11,780

565,905

19,462

2015

345,454

108,000

11,045

–

464,499

19,046

–

207,649

1,412,811

230,049

1,315,288

155,368

1,206,751

172,096

988,462

71,052

656,419

68,698

552,243

2016

2,655,834

1,910,000

80,958

55,227

4,702,019

106,866

207,000

744,925

951,925

5,760,810

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

1. Short-Term FAR is the total cost of salary, exclusive of superannuation. In 2016, FAR for Mr Wasow includes a conditional rights share based payment that is amortised
over an 18 month (conditional) period. In 2016, Mr Wasow received 177,988 conditional rights calculated by dividing the aggregate grant value of $207,000 by an
independently determined Volume Weighted Average Price (VWAP) of $1.163 per right. The grant date was 7 January 2016 with release date of 28 December 2018.
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 2015, Mr Wasow was the recipient of 114,930 share rights at a VWAP of
$1.801. The grant date was on 7 January 2015 with a release date of 28 December 2017 and the share rights vested on 8 July 2016. In 2016, Mr Foster elected
to increase his superannuation contribution (reflected in the superannuation column) which caused a reduction in his recorded 2016 FAR by the same amount.

2. Short-term incentive payments reflect the cash value paid for the years ended 31 December 2016 and 31 December 2015.
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 and payment in lieu of dividend.
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.

ALUMINA LIMITED ANNUAL REPORT 2016

TABLE 7 2016 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

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

STI PAID

725,000

375,000

485,000

368,000

500,000

275,000

200,000

108,000

1,910,000

1,126,000

PERCENTAGE
PAID

PERCENTAGE
FORFEITED

175%

91%

100%

76%

138%

76%

110%

59%

132%

78%

–

24%

–

24%

–

41%

–

22%

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

TABLE 8 PERFORMANCE RIGHTS GRANTED AS REMUNERATION FOR THE YEARS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015

CEO

Peter Wasow

Senior Executives

Chris Thiris

YEAR1

2016

2015

2016

2015

Stephen Foster

2016

Andrew Wood

2015

2016

2015

NUMBER OF
PERFORMANCE
RIGHTS AS AT
1 JANUARY2

NUMBER GRANTED
DURING THE YEAR
AS REMUNERATION3

VALUE OF
PERFORMANCE
RIGHTS
AT GRANT DATE4

NUMBER VESTED
DURING YEAR5

VALUE VESTED
DURING YEAR6

NUMBER LAPSED

DURING YEAR7

VALUE LAPSED

VALUE AS PROPORTION

NUMBER OF

MINIMUM VALUE OF

MAXIMUM VALUE OF

DURING YEAR8

OF REMUNERATION %9

PERFORMANCE RIGHTS

GRANTS YET TO VEST

GRANTS YET TO VEST11

AS AT 31 DECEMBER10

647,900

404,000

581,076

561,400

434,737

555,600

174,566

195,900

356,000

$281,240

(404,000)

$715,080

243,900

$275,607

–

237,800

$187,862

(418,176)

$701,329

162,900

$184,077

(143,224)

$163,991

177,600

$140,304

(312,337)

$523,828

122,400

$138,312

(168,035)

$192,400

(75,228)

($59,204)

94,000

64,400

$74,260

(110,166)

$184,760

$72,772

(59,241)

$67,831

(26,493)

($20,850)

–

40.10%

13.58%

62.94%

26.46%

55.03%

27.47%

39.46%

21.68%

599,900

647,900

400,700

581,076

300,000

434,737

158,400

174,566

–

$556,847

$651,327

$371,939

$564,826

$278,616

$422,695

$147,032

$173,078

For Performance Rights granted on 19 February 2016, Performance Rights
vest on satisfaction of the performance criteria on 7 December 2018. The
eligible participant then enters an exercise period that concludes at 5:00pm
(Melbourne time) on the date that is seven years after vesting. Vested ESP
entitlements that are not exercised by the end of the Exercise Period will
lapse (and consequently no Shares will be allocated, and no Cash Settlement
Amounts will be paid, in respect of those vested ESP entitlements). However,
if any of a eligible participants vested ESP entitlements would otherwise lapse
at the end of the Exercise Period because of this rule, and they have not
previously notified Alumina Limited that they do not wish those vested ESP
entitlements to exercised, then they will be deemed to be exercised by the
eligible participant. For Performance Rights granted on 5 January 2015,
if at the end date for testing on 11 December 2017, less than 100 percent
of the ESP entitlements vest on the basis of the performance tests, those
that do not vest will lapse.
Includes the number of Performance Rights granted that were subject to
testing in 2016.
Performance Rights granted on 19 February 2016 (2015: 5 January 2015)
for the three year performance test period concluding 7 December 2018

(2015: 11 December 2017). The value of 2016 Performance Right at grant
date was $0.79 (2015: $1.13).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.
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 2016. 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, lapse and
performance hurdles. The rights are those granted in 2016.
The number of Performance Rights that vested in 2016 due to testing
of grants made in 2013 and 2014. For Performance Rights granted in
2014, 100 per cent of that tranche vested as a result of their performance
exceeding the 75th percentile of the comparator groups. For Performance
Rights granted in 2013, 98 per cent of that tranche tested against the
International Comparator Group vested initial test in December 2015.

TABLE 8.1 CONDITIONAL RIGHTS GRANTED TO THE CEO AS REMUNERATION FOR THE YEARS ENDED 31 DECEMBER 2016
AND 31 DECEMBER 2015

YEAR

NUMBER OF
CONDITIONAL
RIGHTS AS AT
1 JANUARY

NUMBER GRANTED
DURING THE YEAR
AS REMUNERATION1

VALUE OF
CONDITIONAL
RIGHTS AT
GRANT DATE2

NUMBER VESTED
DURING YEAR3

VALUE VESTED
DURING YEAR4

NUMBER LAPSED

DURING YEAR6

VALUE LAPSED

DURING YEAR7

VALUE AS PROPORTION

OF REMUNERATION %8

NUMBER OF

CONDITIONAL RIGHTS

AS AT 31 DECEMBER9

MAXIMUM VALUE OF

GRANTS YET TO VEST10

CEO

Peter Wasow

2016

2015

114,930

164,908

177,988

$207,000

(114,930)

$151,708

114,930

$207,000

(164,908)

$206,135

–

14.44%

18.21%

177,988

114,930

–

Mr Wasow receives annually, Conditional Rights to a set value as an equity component of his FAR. In 2016 the number of Conditional Rights was equal to
the set value of $207,000 divided by an independently determined Volume Weighted Average Price (VWAP) which, for 2016 was $1.163 (177,988 shares).
Mr Wasow FAR did not increase between 2015 and 2016 therefore total value of the initial grant of Conditional Rights was $207,000.

2.
3. The number of Conditional Rights vested is the number granted in the prior year following the completion of the service condition of 18 months.
4.

Value vested is equal to the number of Conditional Rights that have satisifed the service condition multiplied by the share price at the time of vesting. In 2016
it was 114,930 Conditional Rights by the share price of $1.32 on 16 September 2016 (2015: 164,908 Conditional Rights by the share price of $1.25 on 24
August 2015.) Although Mr Wasow’s Conditional Rights vested at the conclusion of the 18 month service period on 8 July 2016, due to a trading lockout for
employees in trading, Mr Wasow did not receive his shares until 16 September 2016 after a trading lockout was lifted.

ALUMINA LIMITED ANNUAL REPORT 2016

The terms and conditions of each grant of Performance Rights affecting remuneration in the previous, current or future reporting

periods are as follows:

TABLE 8 PERFORMANCE RIGHTS GRANTED AS REMUNERATION FOR THE YEARS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015

CEO

Peter Wasow

Senior Executives

Chris Thiris

YEAR1

2016

2015

2016

2015

2016

2015

647,900

404,000

581,076

561,400

434,737

555,600

174,566

195,900

NUMBER OF

PERFORMANCE

NUMBER GRANTED

DURING THE YEAR

RIGHTS AS AT

AS REMUNERATION3

1 JANUARY2

VALUE OF

PERFORMANCE

RIGHTS

AT GRANT DATE4

NUMBER VESTED

DURING YEAR5

VALUE VESTED

DURING YEAR6

NUMBER LAPSED
DURING YEAR7

VALUE LAPSED
DURING YEAR8

VALUE AS PROPORTION
OF REMUNERATION %9

NUMBER OF
PERFORMANCE RIGHTS
AS AT 31 DECEMBER10

MINIMUM VALUE OF
GRANTS YET TO VEST

MAXIMUM VALUE OF
GRANTS YET TO VEST11

356,000

$281,240

(404,000)

$715,080

243,900

$275,607

–

237,800

$187,862

(418,176)

$701,329

162,900

$184,077

(143,224)

$163,991

–

Stephen Foster

2016

177,600

$140,304

(312,337)

$523,828

Andrew Wood

$74,260

(110,166)

$184,760

–

122,400

$138,312

(168,035)

$192,400

(75,228)

($59,204)

$72,772

(59,241)

$67,831

(26,493)

($20,850)

94,000

64,400

40.10%

13.58%

62.94%

26.46%

55.03%

27.47%

39.46%

21.68%

599,900

647,900

400,700

581,076

300,000

434,737

158,400

174,566

–

$556,847

$651,327

$371,939

$564,826

$278,616

$422,695

$147,032

$173,078

The remainder of the Rights tested against the International Comparator
Group vested at the first retest in June 2016. For the 2013 Performance
Rights tested against the ASX Comparator Group, none vested at the initial
test conducted in December 2015. Approximately 66 per cent of the ASX
component tested at the first retest in June 2016 vested and the remainder
vested at the second retest in December 2016.
The value of Performance Rights vested is determined by the number of
vested Rights multiplied by the market price at the vesting date. The 2013
Performance Rights retested in June 2016 did not vest to the senior executives
until 21 September 2016 due to an internal embargo on trading in the
Company’s shares while the Company was in negotiations with Alcoa on
their separation and the pending court action against Alumina Limited. On
settlement of the negotiations and the termination of the court action, the
trading lockout was lifted and shares awarded vested to the account of the
senior executives on 21 September 2016. The 2014 Performance Rights,
tested in December 2016, vested to the account of the senior executives
on 15 December 2016.

8.
9.

The number of the Performance Rights that did not meet the criteria for vesting
and are not subject to further testing and therefore lapsed. 100 per cent of the
2013 and 2014 Performance Rights granted, vested in 2016 (refer note 4 above).
Therefore, no Performance Rights lapsed in 2016. In 2015, approximately 55
percent of the Performance Rights granted on 9 March 2012 did not vest and
therefore lapsed.
Value is nil due to no Performance Rights lapsing in 2016.
Value of granted and vested Performance Rights represented as a percentage
of total remuneration.

10. Number of Performance Rights granted subject to future testing.
11. Maximum value of Performance Rights subject to future testing. Maximum
value is determined by multiplying the number of untested Performance
Rights by the fair value that 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 Right vest. The
minimum value of the Performance Rights for any given year is zero.

TABLE 8.1 CONDITIONAL RIGHTS GRANTED TO THE CEO AS REMUNERATION FOR THE YEARS ENDED 31 DECEMBER 2016

AND 31 DECEMBER 2015

YEAR

NUMBER OF

CONDITIONAL

NUMBER GRANTED

DURING THE YEAR

RIGHTS AS AT

AS REMUNERATION1

1 JANUARY

CONDITIONAL

RIGHTS AT

GRANT DATE2

VALUE OF

NUMBER VESTED

DURING YEAR3

VALUE VESTED

DURING YEAR4

NUMBER LAPSED
DURING YEAR6

VALUE LAPSED
DURING YEAR7

VALUE AS PROPORTION
OF REMUNERATION %8

NUMBER OF
CONDITIONAL RIGHTS
AS AT 31 DECEMBER9

MAXIMUM VALUE OF
GRANTS YET TO VEST10

CEO

Peter Wasow

2016

2015

114,930

164,908

177,988

$207,000

(114,930)

$151,708

114,930

$207,000

(164,908)

$206,135

–

14.44%

18.21%

177,988

114,930

–

6. No Conditional Rights lapsed
7. No Conditional Rights lapsed
8. Percentage proportion of remuneration is determined by value of granted and vested Conditional Rights as a percentage of total remuneration.
9. Number of Conditional Rights yet to meet the service condition and have not lapsed.
10. The maximum value of the Conditional Rights is based on the number of rights that vest and are released at the expiration of the three year restricted

period multiplied by share price on the date of release.

SENIOR EXECUTIVE SHAREHOLDING
TABLE 9 SENIOR EXECUTIVE SHAREHOLDINGS FOR THE YEARS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015

BALANCE OF
SHARES AS AT
1 JANUARY1

SHARES ACQUIRED
DURING THE YEAR
UNDER EMPLOYEE
SHARE PLAN2

OTHER SHARES
ACQUIRED DURING
THE YEAR

SHARES SOLD
DURING THE YEAR

BALANCE OF
SHARES HELD AT
31 DECEMBER

Peter Wasow

2016

214,908

404,000

Chris Thiris

2015

2016

2015

50,000

263,224

69,500

Stephen Foster 2016

511,842

2015

346,304

Andrew Wood

2016

111,010

2015

51,769

–

418,176

143,224

312,337

168,035

110,166

59,241

114,930

164,908

132,600

50,500

(278,000)

–

125,538

(210,000)

37,503

–

(40,000)

(71,176)

–

455,838

214,908

814,000

263,224

739,717

511,842

150,000

111,010

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.
Includes vested 2013 Performance Rights that were tested in June 2016 and December 2016 and 2014 Performance Rights that were tested in December 2016.

ALUMINA LIMITED ANNUAL REPORT 2016

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 notice
from Mr Thiris and Mr Foster

• 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.

Andrew Wood

No fixed term,

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

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.

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.

3. NON-EXECUTIVE DIRECTORS REMUNERATION

The maximum remuneration for Non-Executive Directors is determined by resolution of shareholders. At the 2016 AGM,
shareholders approved a maximum aggregate remuneration of $1,500,000 per annum for Non-Executive Directors. A total
of $1,117,670 was paid in Non-Executive Director fees in 2016.

In 2016 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

Compensation Committee Chair

Audit & Risk Committee Chair

Other Committee Chair

$10,000 (aggregate)

$15,000

$10,000

Non-Executive Directors participation on Board Committees is set out on page 16.

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 10.

TABLE 10

John Pizzey

Emma Stein

Chen Zeng

Peter Day

Mike Ferraro

Total

SHORT-TERM BENEFITS

POST EMPLOYMENT

TOTAL REMUNERATION

FEES – CASH

NON-MONETARY
BENEFITS

SUPERANNUATION
GUARANTEE1

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

357,008

357,425

174,193

174,174

159,262

159,430

174,193

174,174

169,216

169,198

1,033,872

1,034,216

–

19,462

19,045

16,557

16,576

15,138

14,969

16,557

16,576

16,084

16,102

83,798

82,033

376,470

190,750

174,400

174,399

190,750

185,300

1,117,670

1,117,669

Non-Executive Directors receive, in addition to their fees, a SGC. The applicable rate for 2016 was 9.5 per cent. For 2015, the applicable rate was
9.5 per cent. Non-Executive Directors do not receive any other retirement benefits.

ALUMINA LIMITED ANNUAL REPORT 2016

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
base fees at the expiry of five years from appointment as a director. The requirement is satisfied when shares are acquired or by the
expiry of the five year term. In 2016, all Non-Executive Directors satisfied this Company policy for minimum shareholding.

TABLE 11 NON–EXECUTIVE DIRECTOR SHAREHOLDINGS FOR THE YEARS ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015

BALANCE OF SHARES
AS AT 1 JANUARY1

OTHER SHARES ACQUIRED
DURING THE YEAR

BALANCE OF SHARES HELD
AT 31 DECEMBER

John Pizzey

Emma Stein

Chen Zeng3

Peter Day4

Mike Ferraro5

2016

2015

2016

2015

2016

2015

2016

2015

82,111

65,445

75,808

58,408

4,804

75,720

54,800

25,000

–

16,6662

–

17,400

–

20,920

43,000

25,000

82,111

75,808

4,804

75,720

68,000

25,000

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. Shares acquired in November 2015 were inadvertently not reported in 2015 and have been inserted for completeness
3. Mr Zeng is a nominee of CITIC and CITIC holds 527,032,812 ordinary fully paid shares in Alumina Limited.
4. Mr Ferraro purchased 43,000 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
23 March 2017

FINANCIAL report

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 19– 33 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 23 March 2017.

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

CONSOLIDATED 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
FOR THE YEAR ENDED 31 DECEMBER 2016

ABOUT THIS REPORT

GROUP STRUCTURE AND AWAC PERFORMANCE

1. Segment Information

2. Investments In Associates

3. Investments In Controlled Entities

FINANCIAL AND CAPITAL RISK

4. Financial Assets And Liabilities

5. Financial Risk Management

6. Capital Management

KEY NUMBERS
7. Expenses

8. Income Tax Expense

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 Review Report
to the Members of Alumina Limited

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

Revenue from continuing operations

Share of net profit of associates accounted for using the equity method

General and administrative expenses

Change in fair value of derivatives/foreign exchange losses

Finance costs

(Loss)/profit before income tax

Income tax expenses

(Loss)/profit for the year attributable to the owners of Alumina Limited

Other comprehensive income/(loss)

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

2015

0.1

109.9

(11.9)

(3.2)

(6.6)

88.3

–

88.3

NOTES

US$ MILLION

2(c)

7(a)

7(b)

2016

0.6

18.1

(25.7)

(14.1)

(9.1)

(30.2)

–

(30.2)

9(b)

4.4

178.5

(0.7)

(452.2)

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

9(b)

7.5

32.0

Other comprehensive income/(loss) for the year, net of tax

190.4

(420.9)

Total comprehensive income/(loss) for the year attributable
to the owners of Alumina Limited

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

Basic earnings per share

Diluted earnings per share

160.2

(332.6)

9(a)

(1.0¢)

3.1¢

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

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2016

CURRENT ASSETS

Cash and cash equivalents

Receivables

Other assets

Total current assets

NON-CURRENT ASSETS

Investment in associates

Property, plant and equipment

Total non-current assets

TOTAL ASSETS

CURRENT LIABILITIES

Payables

Provisions

Other liabilities

Total current liabilities

NON-CURRENT LIABILITIES

Borrowings

Derivative financial instruments

Provisions

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Treasury shares

Reserves

Retained earnings

TOTAL EQUITY

NOTES

US$ MILLION

2016

2015

4(a)

8.6

0.1

3.0

9.3

–

3.3

11.7

12.6

2(c)

2,106.0

2,098.0

0.1

2,106.1

2,098.1

2,117.8

2,110.7

1.3

0.3

0.1

1.7

92.4

16.2

0.6

109.2

110.9

1.7

0.2

2.1

110.5

14.7

0.5

125.7

127.8

2,006.9

1,982.9

2,682.9

–

(1.4)

(1,125.3)

(1,305.9)

449.3

607.3

2,006.9

1,982.9

4(b)

4(c)

9(a)

9(b)

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

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016

CURRENT ASSETS

Cash and cash equivalents

Receivables

Other assets

Total current assets

NON-CURRENT ASSETS

Investment in associates

Property, plant and equipment

Total non-current assets

TOTAL ASSETS

CURRENT LIABILITIES

Payables

Provisions

Other liabilities

Total current liabilities

NON-CURRENT LIABILITIES

Borrowings

Provisions

Derivative financial instruments

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Treasury shares

Reserves

Retained earnings

TOTAL EQUITY

Balance as at 1 January 2015

2,618.8

(853.0)

658.2

2,424.0

NOTES

US$ MILLION

CONTRIBUTED
EQUITY1

RESERVES

RETAINED
EARNINGS

TOTAL

11.7

12.6

Transactions with owners in their capacity as owners:

Profit for the year

Other comprehensive (loss)/income for the year

Dividends paid

Dividend reinvestment plan

Movement in treasury shares

–

62.9

(0.2)

–

(452.9)

88.3

32.0

88.3

(420.9)

–

(171.2)

–

62.9

(0.2)

9(a)

Balance as at 31 December 2015

2,681.5

(1,305.9)

607.3

1,982.9

Balance as at 1 January 2016

2,681.5

(1,305.9)

607.3

1,982.9

Loss for the year

Other comprehensive income/(loss) for the year

Transactions with owners in their capacity as owners:

Dividends paid

Movement in treasury shares

9(a)

Movement in share based payments reserve

–

1.4

–

(30.2)

182.9

7.5

(30.2)

190.4

–

(2.3)

(135.3)

–

1.4

(2.3)

Balance as at 31 December 2016

2,682.9

(1,125.3)

449.3

2,006.9

1. Treasury shares have been deducted from contributed equity.

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

NOTES

US$ MILLION

2016

2015

4(a)

8.6

0.1

3.0

9.3

–

3.3

2(c)

2,106.0

2,098.0

0.1

2,106.1

2,098.1

2,117.8

2,110.7

1.3

0.3

0.1

1.7

92.4

16.2

0.6

109.2

110.9

1.7

0.2

2.1

110.5

14.7

0.5

125.7

127.8

2,006.9

1,982.9

2,682.9

–

(1.4)

(1,125.3)

(1,305.9)

449.3

607.3

2,006.9

1,982.9

4(b)

4(c)

9(a)

9(b)

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

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016

NOTES

US$ MILLION

2016

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

Finance costs paid

Interest paid under cross currency interest rate swap

Interest received under cross currency interest rate swap

Other

(27.9)

0.9

150.2

0.7

(7.2)

(3.5)

5.0

0.2

Net cash inflow from operating activities

10(a)

118.4

Cash flows from investing activities

Payments to investments in associates

Proceeds from return of invested capital

Net cash inflow from investing activities

2(c)

Cash flows from financing activities

Proceeds from borrowings

Repayment of borrowings

Dividends paid

Net cash outflow from financing activities

(48.0)

81.9

33.9

30.0

(50.0)

(135.3)

(155.3)

(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)

Net decrease in cash and cash equivalents

(3.0)

(13.6)

Cash and cash equivalents at the beginning of the financial year

Effects of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the financial year

4(a)

9.3

2.3

8.6

24.9

(2.0)

9.3

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

ABOUT THIS REPORT

THE NOTES TO THE FINANCIAL STATEMENTS

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 2016 was authorised
for issue in accordance with a resolution of the Directors on
23 March 2017.

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

• incorporates assets, liabilities and results of operations of
wall 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
(AAS) 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 historical cost convention, as

modified by the revaluation of certain financial assets and
liabilities (including derivative instruments) at fair value
through profit or loss.

• the Company is of a kind referred to in the Australian Securities

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.

and Investments Commission Corporations Instrument
2016/191, relating to the “rounding off” of amounts in the
financial report. Amounts in the financial report have been
rounded off in accordance with that Legislative Instrument to
the nearest hundred thousand dollars, and presented in US
dollars, except where otherwise required.

• 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.

• adopts all new and amended Accounting Standards and

Interpretations issued by the AASB that are effective for the
annual reporting beginning 1 January 2016.

ACCOUNTING POLICIES

• 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.

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.

ABOUT THIS REPORT (CONTINUED)

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
these 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.

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

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 form a reportable segments. A full description of Alumina Limited’s business model is
included in the operating and financial review on pages 19– 33 of the Annual Report.

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

YEAR ENDED 31 DECEMBER 2016

US$ MILLION

Investments in Associates

Other assets

Liabilities

Consolidated net assets

AUSTRALIA

1,043.1

6.4

(110.9)

938.6

BRAZIL

761.2

5.1

–

OTHER

301.7

0.3

–

766.3

302.0

YEAR ENDED 31 DECEMBER 2015

US$ MILLION

Investments in Associates

Other assets

Liabilities

Consolidated net assets

Australia

1,132.3

12.0

(127.8)

1,016.5

Brazil

617.4

0.4

–

Other

348.3

0.3

–

617.8

348.6

TOTAL

2,106.0

11.8

(110.9)

2,006.9

Total

2,098.0

12.7

(127.8)

1,982.9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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

PERCENTAGE
OWNERSHIP

Alcoa of Australia Limited

Bauxite, alumina & aluminium production

Australia

Alcoa World Alumina LLC

Bauxite and alumina production

America

Alumina Espanola S.A.

Alumina production

Alcoa World Alumina Brasil Ltda. Bauxite and alumina production

Spain

Brazil

AWA Saudi Ltda.

Bauxite and alumina production

Hong Kong

Enterprise Partnership

Finance lender

Australia

2016

2015

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
Corporations Act 2001, Australian Accounting Standards and
interpretations 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 pension 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 investments in associates

The Group assesses at each reporting period whether there is
objective evidence that the investment in associates is 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.

2. INVESTMENTS IN ASSOCIATES (CONTINUED)

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

Furthermore, the following sensitivity analyses (stress testing) are
performed over the value in use calculations:

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.

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

• Currency rate fluctuation (plus or minus 10%).
• Increased discount rate (WACC).

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.

No impairment loss was recognised in the years ended
31 December 2016 and 31 December 2015.

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

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

Carrying value

Reconciliation of carrying amount:

Opening carrying value 1 January

Net additional (return)/funding in AWAC entities

Profit for the year

Other comprehensive loss for the year

Dividends and distributions paid

Closing net assets

US$ MILLION

2016

2015

1,180.4

5,726.7

1,504.9

5,643.0

(1,127.1)

(1,311.6)

(1,282.7)

(1,436.9)

4,497.3

4,399.4

40%

1,799.0

1,759.7

175.8

107.0

(34.9)

59.1

175.8

109.2

(35.5)

88.8

2,106.0

2,098.0

2,514.5

(33.9)

18.1

174.7

(150.9)

(41.0)

109.9

(422.5)

(62.9)

2,106.0

2,098.0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

2. INVESTMENTS IN ASSOCIATES (CONTINUED)

SUMMARISED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

US$ MILLION

Revenues

Profit from continuing operations

Profit for the year

Other comprehensive income/(loss) for the year

Total comprehensive income/(loss) for the year

Group Share of profit for the year as a percentage

Group Share of profit for the year in dollars

Mineral rights and bauxite amortisation

Movement in deferred tax liability on mineral rights and bauxite assets

Share of profit from associate accounted for using equity method

Dividends and distributions received from AWAC

2016

2015

4,057.1

5,380.4

48.9

475.8

524.7

40%

19.6

(2.1)

0.6

18.1

150.9

278.5

(1,052.3)

(773.8)

40%

111.4

(2.1)

0.6

109.9

62.9

(D) 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 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.

By order dated 8 February 2016, the court granted AWA’s
motion and denied Glencore’s motion, resulting in AWA 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 ruling. AWA and SCA
filed an opposition to that application on 29 February 2016.
On 10 March 2016, the court denied Glencore’s motion for
interlocutory appeal and on the same day entered judgment on
claims other than Glencore’s claims for costs and fees it incurred
in defending and settling the earlier Superfund action brought
against Glencore by the Government of the Virgin Islands.

On 29 March 2016, Glencore filed a withdrawal of its notice
of interlocutory appeal and on 6 April 2016, Glencore filed
an appeal of the court’s 10 March 2016 judgement to the
Delaware Supreme Court which set the appeal for argument
for 2 November 2016. On 4 November 2016, the Delaware
Supreme Court affirmed the judgement of the Delaware
Superior Court. Remaining in the case are Glencore’s claims
for costs and fees it incurred related to the previously described
Superfund action; these claims are not material.

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, Arconic Inc, Alcoa Corporation 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 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
2016 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 2016 are set out below.

NAME

NOTES

PLACE OF INCORPORATION

PERCENTAGE OWNERSHIP

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

Brazil

Delaware, USA

Brazil

2016

2015

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 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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.

2016

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

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

AT FAIR VALUE THROUGH
PROFIT OR LOSS

AT AMORTISED
COSTS

TOTAL

US$ MILLION

–

16.2

8.6

0.1

8.7

1.3

92.4

–

93.7

85.0

AT FAIR VALUE THROUGH
PROFIT OR LOSS

AT AMORTISED
COSTS

US$ MILLION

–

14.7

9.3

–

9.3

1.7

110.5

–

112.2

102.9

8.6

0.1

8.7

1.3

92.4

16.2

109.9

101.2

TOTAL

9.3

–

9.3

1.7

110.5

14.7

126.9

117.6

The Group’s exposure to various risks associated with the financial instruments is disclosed 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.

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

(B) BORROWINGS

US$ MILLION

2016

5.3

3.3

8.6

2015

1.8

7.5

9.3

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

2016

–

92.4

2015

20.0

90.5

110.5

Alumina Limited has a US$300 million syndicated bank facility with two equal tranches maturing in December 2017 and July 2020.
As at 31 December 2016 there were no drawdowns under the syndicated facility so the undrawn available facility amount as
at 31 December 2016 was $300 million (2015: $20 million was drawn with the remaining undrawn facility of $280 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 change in credit rating for Alumina Limited triggered a 1.75% step up in coupon from 5.5% to 7.25%, effective 20 November
2016.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 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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 months 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 three levels prescribed under the accounting standards. An explanation of each level follows underneath the table.

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

2016

US$ MILLION

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

Total financial liabilities at fair value through profit or loss

2015

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

Total financial liabilities at fair value through profit or loss

–

16.2

14.7

–

16.2

14.7

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.

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.

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

2016

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)

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)

USD

AUD

OTHER

TOTAL

US$ MILLION

3.8

–

3.8

–

3.8

(108.4)

(104.6)

0.1

0.2

1.3

92.4

93.7

(93.5)

108.4

14.9

4.7

–

4.7

–

4.7

–

4.7

8.6

0.1

8.7

1.3

92.4

93.7

(85.0)

–

(85.0)

USD

AUD

OTHER

TOTAL

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)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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.

In 2016 and 2015, 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 change in credit rating for Alumina Limited triggered a 1.75% step up in coupon from 5.5% to 7.25%. To cover the increased
interest rate exposure an additional CCIRS was entered into.

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:

2016

Cash and cash equivalents

Receivables

Total financial assets

Payables

Borrowings

Total non-derivative financial liabilities

Net non-derivative financial (liabilities)/assets

Weighted average interest rate before derivatives

Weighted average interest rate after derivatives

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

FLOATING
INTEREST

FIXED INTEREST

NON-INTEREST
BEARING

US$ MILLION

8.6

–

8.6

–

8.6

1.6%

–

92.4

(92.4)

5.8%

3.4%

–

0.1

1.3

–

1.3

(1.2)

FLOATING
INTEREST

FIXED INTEREST

NON-INTEREST
BEARING

US$ MILLION

9.3

–

9.3

–

20.0

10.7

1.6%

–

90.5

5.5%

3.1%

–

1.7

–

1.7

TOTAL

8.6

0.1

8.7

1.3

92.4

93.7

(85.0)

TOTAL

9.3

–

9.3

1.7

110.5

112.2

102.9

Had interest rates on floating rate debt during 2016 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$0.6 million lower/higher (2015: US$0.7 million lower/higher).

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 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, represent 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

2016

150.0

300.0

2015

–

280.0

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

2016

Trade payables

Borrowings

Total non-derivative financial liabilities

Derivative financial liabilities

2015

Trade payables

Borrowings

Total non-derivative financial liabilities

Derivative financial liabilities

LESS THAN 6
MONTHS

6–12
MONTHS

1–2
YEARS

2–5
YEARS

TOTAL

US$ MILLION

1.3

–

1.3

–

1.7

–

1.7

–

20.0

–

92.4

16.2

–

90.5

14.7

1.3

92.4

93.7

16.2

1.7

110.5

112.2

14.7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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 borrowing 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 2016 and 31 December 2015 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 US2.9 cents fully franked at 30% per fully paid share declared
24 August 2016 and paid on 15 September 2016 (2015: US4.5 cents fully franked
at 30% per fully paid share declared 19 August 2015 and paid on 28 September 2015)

Final dividend of US1.8 cents fully franked at 30% per fully paid share declared 25
February 2016 and paid on 23 March 2016 (2015: US1.6 cents fully franked at
30% per fully paid share declared 26 February 2015 and paid on 25 March 2015)

US$ MILLION

2016

92.4

(8.6)

83.8

92.4

2,006.9

2,099.3

4.0%

US$ MILLION

2016

83.5

51.8

2015

110.5

(9.3)

101.2

110.5

1,982.9

2,093.4

4.8%

2015

126.3

44.9

Total dividends

135.3

171.2

Since the year-end the Directors have recommended the payment of a final dividend of US3.1 cents per share (2015: US1.8 cents
per share), fully franked based on the tax paid at 30%. Record date to determine entitlements to the dividend is 2 March 2017.
The aggregate amount of the proposed dividend expected to be paid on 22 March 2017 out of retained earnings at 31 December
2016, but not recognised as a liability at the year-end, is $89.3 million.

6. CAPITAL MANAGEMENT (CONTINUED)

Franking credits available for subsequent financial years, based on a tax rate
of 30% (2015: 30%)

A$ MILLION

2016

347.5

2015

339.5

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

2016

150.2

2015

56.2

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 measure 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 end of the reporting period of high-quality corporate 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

US$ MILLION

2016

2015

0.2

5.8

6.0

0.2

4.9

5.1

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

(B) FINANCE COSTS

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

8. INCOME TAX EXPENSE

(A) INCOME TAX EXPENSE AND DEFERRED TAXES

US$ MILLION

2016

2015

6.5

2.0

0.6

–

9.1

3.6

2.1

0.8

0.1

6.6

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 charges in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.

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.

Current tax

Deferred tax

Aggregate income tax expense

US$ MILLION

2016

2015

–

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.

8. INCOME TAX EXPENSE (CONTINUED)

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

Transaction costs and other

Total deferred tax assets other than tax losses

Net deferred tax (liabilities)/assets before tax losses

Deductible temporary differences and tax losses not recognised

Net deferred tax (liabilities)/assets

US$ MILLION

2016

2015

4.6

0.3

0.4

0.2

0.9

(3.7)

3.7

–

3.4

0.2

3.2

0.3

3.7

0.3

(0.3)

–

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.

(B) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE

(Loss)/profit before income tax

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

US$ MILLION

2016

(30.2)

9.1

2015

88.3

(26.5)

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

Share of equity accounted profit not assessable for tax

(18.1)

(109.9)

Foreign income subject to accruals tax

Share of Partnership income assessable for tax

Timing differences not recognised

Tax losses not recognised

Previously unrecognised tax losses now recouped to reduce current tax expense

Non-deductible expenses

Net movement

Consequent (increase)/decrease in charge for income tax

Aggregate income tax expense

2.8

3.0

–

26.3

(0.2)

16.4

30.2

(9.1)

–

1.8

1.5

(1.4)

17.8

–

1.9

(88.3)

26.5

–

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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.

Cash flow hedges

Actuarial gains on retirement benefit obligations

Total tax expense 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

US$ MILLION

2016

2.4

2.3

4.7

US$ MILLION

2016

973.9

951.5

2015

(0.3)

15.2

14.9

2015

912.2

951.5

1,925.4

1,863.7

319.1

285.4

604.5

298.8

285.4

584.2

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.

MOVEMENT IN SHARE CAPITAL

NUMBER OF SHARES

US$ MILLION

Balance brought forward

2,879,843,498

2,806,225,615

Movement for the period

–

73,617,8831

2016

2015

2016

2,682.9

–

Total issued capital

2,879,843,498

2,682.9

2015

2,620.0

62.9

2,682.9

1. The Company’s Dividend Reinvestment Plan was applicable to the 2015 interim dividend resulting in 73,617,883 shares issued in September 2015 at a

1.5% discount to the market price.

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$ MILLION

Balance brought forward

Shares acquired by Alumina
Employee Share Plan Pty Ltd (average
price A$1.37 per share (2015:
A$1.78 per share)

2016

61,717

1,508,604

2015

423,695

600,000

2016

2015

1,413,606

1,558,319

1,176,904

827,340

Employee performance rights vested

(1,568,465)

(961,978)

(2,970,020)

(590,638)

Total treasury shares

1,856

61,717

1,905

1,413,606

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 and diluted earnings per share

NUMBER OF SHARES

2016

2015

2,879,474,499

2,824,328,800

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

(B) OTHER RESERVES

Other Reserves include Assets revaluation reserve, Capital reserve, Option premium on convertible bonds reserve, Share-based
payments reserve, Cash-flow hedge reserve and Foreign currency translation reserve.

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

US$ MILLION

2016

(1,370.7)

178.5

2015

(918.5)

(452.2)

Balance at the end of the financial year

(1,192.2)

(1,370.7)

10. CASH FLOW INFORMATION

(A) RECONCILIATION OF (LOSS)/PROFIT AFTER INCOME TAX TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES

(Loss)/profit from continuing operations after income tax

Share of net profit 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 from operating activities

US$ MILLION

2016

(30.2)

18.1

150.9

0.9

15.1

118.6

(0.1)

0.3

(0.4)

–

118.4

2015

88.3

(109.9)

62.9

0.8

2.1

44.2

0.2

(0.2)

(0.8)

43.6

(B) NON-CASH FINANCING AND INVESTING ACTIVITIES

There were no non-cash financing or investing activities during 2016.

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.

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.

(B) COMPENSATION OF KEY MANAGEMENT PERSONNEL

Detailed remuneration disclosures for the key management personnel, defined as Group Directors, CEO and Senior Executives, are
provided in the remuneration report on pages 35 to 59 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 2016 of 0.7439 (2015: 0.7519) has been used for conversion.

DIRECTORS AND SENIOR EXECUTIVES

Short-term employee benefits

Post-employment benefits

Share based payments

Total

US$

2016

2015

4,242,211

3,706,166

141,834

708,137

135,385

677,580

5,092,182

4,519,131

There have been no other related party transactions made during the period or balances outstanding as at 31 December 2016,
between the Group, its related parties, the Directors or key management personnel (2015: Nil).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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 48 to 51 of this annual report.

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

2016

GRANT DATE

EXPIRY DATE

BALANCE AT
START OF THE
YEAR
NUMBER

GRANTED
DURING THE
YEAR
NUMBER

8/2/2013

7/12/2015

687,768

10/2/2014

6/12/2016

1,110,770

5/1/2015

11/12/2017

694,250

–

19/12/2016

7/12/2018

–

1,016,250

VESTED
DURING THE
YEAR
NUMBER

(687,768)

(1,109,102)

–

LAPSED
DURING THE
YEAR
NUMBER

BALANCE AT
END OF THE
YEAR
NUMBER

–

(1,668)

(4,384)

–

689,866

(11,513)

1,004,737

Total

2015

GRANT DATE

EXPIRY DATE

9/3/2012

11/12/2014

8/2/2013

7/12/2015

10/2/2014

6/12/2016

2,492,788

1,016,250

(1,796,870)

(17,565)

1,964,603

BALANCE AT
START OF THE
YEAR
NUMBER

GRANTED
DURING THE
YEAR
NUMBER

VESTED
DURING THE
YEAR
NUMBER

LAPSED
DURING THE
YEAR
NUMBER

BALANCE AT
END OF THE
YEAR
NUMBER

666,040

1,354,880

1,113,350

–

(297,646)

(368,394)

–

(664,332)

–

(2,780)

(2,580)

(1,560)

687,768

1,110,770

694,250

5/1/2015

11/12/2017

–

695,810

Total

3,134,270

695,810

(961,978)

(375,314)

2,492,788

The weighted average remaining contractual life of performance rights outstanding at the end of the period was 2.6 years
(2015: 2.0 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 pages 39 to 40 of this annual report.

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

Performance rights granted under the Alumina Employee Share Plan

CEO annual conditional share rights grant

Total

US$ 000’S

2016

645

154

809

2015

607

160

767

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

2016

2015

383

–

423

355

428

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 2016 and 31 December 2015, 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 2016.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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 payable 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.

(A) SUMMARISED FINANCIAL INFORMATION

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

BALANCE SHEET

Current assets

Total assets

Current liabilities

Total liabilities

SHAREHOLDERS’ EQUITY

Issued capital

Reserves

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

Profit for the year

Total comprehensive income for the year

US$ MILLION

2016

2015

7.8

3,815.1

1.7

116.3

13.4

3,867.5

1.9

133.0

2,682.9

237.2

778.7

239.3

812.3

3,698.8

3,734.5

101.8

38.1

16. PARENT ENTITY FINANCIAL INFORMATION (CONTINUED)

(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 Espanola 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 Ciprian 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.

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 Corporation guarantees for
the Ma’aden Bauxite and Alumina Company cover total debt
service requirements through 2019 and 2024. In the event Alcoa
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 of 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 2016 or 31 December 2015. 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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 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

MOVEMENT 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

2016

150.9

0.2

(25.3)

(14.8)

(9.2)

101.8

–

101.8

–

101.8

2016

679.7

101.8

(135.3)

646.2

2015

62.9

–

(11.5)

(1.4)

(6.7)

43.3

–

43.3

–

43.3

2015

807.6

43.3

(171.2)

679.7

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

Investment 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

US$ MILLION

2016

2015

3.9

72.9

2.4

79.2

1,669.6

1,933.6

0.1

3,603.3

3,682.5

1.3

0.4

1.7

97.8

16.2

0.5

114.5

116.2

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

3,566.3

3,602.0

2,682.9

237.2

646.2

239.4

679.7

3,566.3

3,602.0

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016

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
2016 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 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

(EFFECTIVE 1 JANUARY 2018)

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 (e.g. 1 January
2017), i.e. 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 2018 but is available for early
adoption. The Group is in the process of assessing the impact
of AASB 15.

AASB 16 LEASES (EFFECTIVE 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 assets 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 in the process of assessing the impact of AASB 16.

DIRECTORS’ DECLARATION

In the Directors’ opinion:

a) the financial statements and notes set out on pages 60 to 91 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 2016 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
23 March 2017

ALUMINA LIMITED ANNUAL REPORT 2016

INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF ALUMINA LIMITED

REPORT ON THE AUDIT OF THE FINANCIAL REPORT

OUR OPINION
In our opinion:

The accompanying financial report of Alumina Limited (the Company) and its controlled entities (together, the Group) is in
accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the Group’s financial position as at 31 December 2016 and of its financial performance

for the year then ended

b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

What we have audited

The Group’s financial report comprises:

• the consolidated balance sheet as at 31 December 2016
• the consolidated statement of profit or loss and other comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• the notes to the consolidated financial statements, and
• the Directors’ declaration.

BASIS FOR OPINION
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001
and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.

OUR AUDIT APPROACH
An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report
as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and
the industry in which it operates.

PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation

Alumina Limited’s (“Alumina”) sole business undertaking is investing globally in bauxite mining, alumina refining with some minor
alumina-based chemical businesses and aluminium smelting operations. All of these business activities are conducted through
Alumina’s 40% investment in several entities which collectively form Alcoa World Alumina and Chemicals (AWAC). Alcoa
Corporation owns the remaining 60% of AWAC and is the manager of these business activities. Alumina participates in AWAC
through the Strategic Council, which consists of three members appointed by Alcoa Corporation and two members appointed by
Alumina. As Alumina does not control or operate the AWAC assets, its role involves strategic investment management on behalf of
its shareholders. Accordingly, this investment has been determined to be an associate and is accounted for under the equity method.

Materiality

Key audit
matters

Audit Scope

Materiality

Audit scope

Key audit matters

• For the purpose of our audit we used
an overall materiality of $21 million,
which represents approximately 1%
of the Group’s total assets.

• We instructed auditors from other
PwC network firms (“component
auditors”) to report to us on the
AWAC financial statements.

• Amongst other relevant topics, we
communicated the following key
audit matters to the Audit and Risk
Management Committee:

• We applied this threshold, together
with qualitative considerations, to
determine the scope of our audit and
the nature, timing and extent of our
audit procedures and to evaluate the
effect of misstatements on the
financial report as a whole.

• We audited the equity accounting for
Alumina’s 40% investment in AWAC.
This process included auditing certain
adjustments made by Alumina to
convert the AWAC results (which were
prepared under US GAAP), to comply
with Australian Accounting Standards.

• We chose total assets primarily

• We audited the remainder

because of the nature of Alumina’s
operations, noting that it is a
generally accepted benchmark for
investment management companies.

• We selected 1% based on our

professional judgement, noting that
it is an accepted investment industry
threshold.

of Alumina’s balance sheet and
statement of profit or loss and
other comprehensive income.

• Our audit also focused on where the
Directors made subjective judgements;
for example, significant accounting
estimates involving assumptions and
inherently uncertain future events.

• Equity accounting for Alumina’s

investment in AWAC

• Impairment indicator assessment
for Alumina’s equity accounted
investment in AWAC

• Impact of Alcoa Inc’s separation
into Alcoa Corporation and
Arconic Inc. on Alumina

• These are further described in the

Key audit matters section of our report.

KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context.

ALUMINA LIMITED ANNUAL REPORT 2016

Key audit matter

How our audit addressed the key audit matter

Equity accounting for Alumina’s investment in AWAC

(Refer to note 2 in the financial report)

Alumina’s equity accounted investment in AWAC is $2.1 billion
and its share of the net profit of AWAC accounted for using the
equity method was $18.1 million.

For AWAC entities other than Alcoa of Australia Limited and
Enterprise Partnership, adjustments are required to convert the
accounting treatment under US GAAP to comply with Australian
Accounting Standards.

We determined the equity accounting to be a key audit matter
because of the magnitude of the Investment in associates
balance and the complexity of the adjustments to convert
from US GAAP to Australian Accounting Standards.

Complexity is involved in determining the differences in the
accounting for areas such as the valuation of inventory, asset
retirement obligation provisions and defined benefit plans. In
arriving at the value of these US GAAP to Australian Accounting
Standards adjustments, the Group is required to use accounting
estimates and significant judgement.

To assess the equity accounting of Alumina’s 40% investment
in AWAC, we:

• Compared the equity accounting schedule prepared by the
Group to the financial statements of AWAC (as audited by
our component auditors under our instruction) and found
them to be consistent.

• Assessed the appropriateness and completeness of the material
US GAAP to Australian Accounting Standards adjustments.

• Considered whether other transactions that had occurred

during the year required a different treatment under
Australian Accounting Standards compared with US GAAP.

• Reconciled the opening equity accounted investment balance to
the final position reflected in the financial report. To do this we:

• Recalculated the share of net profit and changes in
reserves of AWAC by examining the audited AWAC
financial statements and recalculating Alumina’s 40%
share. No material differences were identified.

• Compared dividends, distributions and capital returns
received from AWAC and additional investments made
through cash calls to the relevant declaration documents
and bank statements.

• We also evaluated the impairment indicator assessment

performed by the Group in relation to the investment balance
(refer to the following Key audit matter).

Impairment indicator assessment for Alumina’s
equity accounted investment in AWAC

To evaluate the impairment indicator assessment of the
AWAC investment we:

(Refer to note 2b in the financial report)

Alumina’s equity accounted investment in AWAC ($2.1 billion)
is the most material balance sheet item in the consolidated
financial statements.

We therefore focused on the assessment which was performed
by Alumina to determine whether there was any objective
evidence that the equity accounted investment in AWAC could
be impaired as at 31 December 2016.

The long term alumina price is the key assumption to which the
valuation of AWAC is most sensitive.

Alumina’s conclusion was that there was no indicator for
impairment for the year ended 31 December 2016.

• Obtained an understanding of process by which the
impairment indicator assessment was conducted.

• Compared the Group’s long term alumina price assumption
to economic analyst and industry forecasts. We found that
the long term alumina price assumption used by the Group
was consistent with market data and industry research.

• Compared the Group’s market capitalisation to its net assets
as at 31 December 2016, noting that market capitalisation
exceeded its net assets by approximately $1.7 billion.

• Evaluated the Group’s assessment of whether there were any
other external or internal sources of information that could
indicate that the investment may be impaired.

Key audit matter

How our audit addressed the key audit matter

We performed the following procedures, amongst others,
in evaluating the potential impact of Alcoa Inc’s separation
on Alumina:

• Obtained the revised AWAC Joint Venture agreements and
Charter of the Strategic Council of AWAC and assessed the
nature of the amendments negotiated by Alumina and Alcoa
Corporation.

• We evaluated the Group’s conclusion that the investment in
AWAC should continue to be accounted for as an associate.

• Evaluated other potential financial reporting implications
of these changes on Alumina, including the need for any
additional adjustments to convert from US GAAP to
Australian Accounting Standards.

Impact of Alcoa Inc’s separation into Alcoa Corporation
and Arconic Inc. on Alumina

(Refer to operating and financial review in the
financial report)

Effective from 1 November 2016, Alcoa Inc. completed its
separation into two independent listed companies. Alcoa
Corporation separated from its former parent company (Alcoa
Inc.), which was subsequently renamed Arconic Inc. As a result,
Alcoa Corporation replaced Alcoa Inc. as Alumina’s joint
venture partner in the AWAC joint venture.

Associated with the separation, Alumina and Alcoa Corporation
negotiated several amendments to the AWAC Joint Venture
agreements. The new agreements resulted in amendments to
the AWAC Joint Venture governance and debt funding and
distribution policies, which took effect upon completion of the
Alcoa separation and other changes that will only be effective
on a change of control.

We determined this to be a key audit matter because the
Group had to make judgements on the above with respect to
Alumina’s business, in particular, whether future profitability or
sustainability were adversely affected by these changes and
whether there were other financial reporting implications arising
from the Alcoa Inc. separation (for example, any implications
for Alumina’s treatment of AWAC as an associate).

OTHER INFORMATION
The Directors are responsible for the other information included in the Group’s annual report for the year ended 31 December 2016,
which comprises:

• At a glance
• Chairman and Chief Executive Officer’s Report
• Sustainability
• Director’s Report
• Operating and Financial Review
• Letter by Chair of the Compensation Committee
• Shareholder Information
• Financial History

but does not include the financial report and our auditor’s report thereon.

ALUMINA LIMITED ANNUAL REPORT 2016

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS 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 gives a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards
Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our audit report.

REPORT ON THE REMUNERATION REPORT

OUR OPINION ON THE REMUNERATION REPORT
We have audited the remuneration report included in pages 35 to 59 of the Directors’ report for the year ended 31 December 2016.

In our opinion, the remuneration report of Alumina Limited for the year ended 31 December 2016 complies with section 300A of
the Corporations Act 2001.

RESPONSIBILITIES
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.

PricewaterhouseCoopers

Nadia Carlin Partner

Melbourne
23 March 2017

DETAILS OF SHAREHOLDINGS AND SHAREHOLDERS
LISTED SECURITIES – 1 MARCH 2017

Alumina Limited has 2,879,843,498 issued fully paid ordinary shares.

SIZE OF SHAREHOLDINGS AS AT 1 MARCH 2017

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

19,502

20,191

6,239

6,550

371

52,853

8,968,207

49,514,926

45,836,354

165,178,533

2,610,345,478

2,879,843,498

0.31

1.72

1.59

5.74

90.64

100.00

Of these, 6,547 shareholders held less than a marketable parcel of $500 worth of shares (274) a total of 979,288 shares.
In accordance with ASX Business Rules, the last sale price on the Company’s shares on the ASX on 1 March 2017 was used
to determine the number of shares in a marketable parcel.

NAME

10.

11.

HSBC CUSTODY NOMINEES (AUST)

J P MORGAN NOMINEES AUSTRALIA LIMITED

CITICORP NOMINEES

CITIC RESOURCES AUSTRALIA PTY LTD

BESTBUY OVERSEAS CO LTD

NATIONAL NOMINEES

BNP PARIBAS NOMS PTY LTD

CITIC RESOURCES AUSTRALIA PTY LTD

RBC GLOBAL SERVICES AUSTRALIA

BESTBUY OVERSEAS CO LTD

BNP PARIBAS NOMS PTY LTD

12. CITIC AUSTRALIA PTY LTD

13.

14.

15.

16.

UBS NOMINEES PTY LTD

AMP LIFE

ARGO INVESTMENTS LIMITED

17. CITICORP NOMINEES PTY LIMITED

19.

20.

RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED

BNP PARIBAS NOMS (NZ)

Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)

Total Remaining Holders Balance

NO. OF FULLY PAID
ORDINARY SHARES

706,302,835

24.53

489,458,496

17.00

303,816,766

10.55

219,617,657

154,114,590

148,095,534

102,521,467

59,282,343

55,713,216

54,219,014

43,612,488

39,799,208

28,033,008

24,113,574

12,429,285

9,752,234

9,249,840

8,953,427

7,049,506

7.63

5.35

5.14

3.56

2.06

1.93

1.88

1.51

1.38

0.97

0.84

0.61

0.43

0.34

0.32

0.31

0.24

2,493,625,865

86.59

386,217,633

13.41

2,879,843,498 100.00

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

17,491,197

ALUMINA LIMITED ANNUAL REPORT 2016

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.

During the reporting period, 1,508,604 Alumina Limited fully paid ordinary shares were purchased on market by the Alumina
Employee Share Plan at an average price of $1.3657.

SUBSTANTIAL SHAREHOLDING AS AT 1 MARCH 2017

SHAREHOLDING

CITIC Resources Australia Pty. Ltd.

Allan Gray Australia Pty. Ltd.

Perpetual Investments Limited

Schroder Investment Management (Australia) Limited

Lazard Asset Management Pacific Limited

527,032,812

265,942,188

255,387,781

197,288,221

185,129,712

18.3

9.23

8.87

6.85

6.43

100

FINANCIAL history

ALUMINA LIMITED AND CONTROLLED ENTITIES

AS AT 31 DECEMBER

2016

2015

2014

2013

2012

US$
MILLION

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

0.6

18.1

–

(25.7)

(14.1)

(9.1)

–

0.1

0.3

109.9

(73.6)

(97.4)

137.1

(17.2)

3.0

–

1.5

(11.9)

(13.5)

(3.2)

(6.6)

–

1.6

(0.8)

(13.6)

(25.3)

(29.4)

–

0.5

(0.4)

(55.6)

Net (loss)/profit attributable to owners of Alumina Limited

(30.2)

88.3

(98.3)

2,117.8

2,110.7

2,543.2

2,964.0

3,311.4

110.9

127.8

119.2

170.6

682.9

2,006.9

1,982.9

2,424.0

2,793.4

2,628.5

2,006.9

1,982.9

2,424.0

2,793.4

2,628.5

135.32

171.2

–

Total assets

Total liabilities

Net assets

Shareholders’ funds

Dividends paid

Dividend payout ratio

Return on equity1

Gearing (net debt to equity)

Dividends received from AWAC

150.2

61.4

16.0

100.0

Statistics

Dividends declared per ordinary share

US6.0c

US6.3c

US1.6c

–

202%

–

(1.5)%

4.0%

3.9%

4.8%

(3.5)%

0.02%

3.4%

4.6%

–3

–

Net tangible assets backing per share

$0.61

$0.60

$0.77

$0.91

1. Based on net (loss)/profit attributable to owners of Alumina Limited.
2.

Final dividend for the financial year ended 31 December 2015, declared and paid in 2016 and interim dividend for the year ended 31 December 2015,
declared and paid in 2015.

3. No interim or final dividend declared for the years ended 31 December 2013 and 31 December 2012.

0.1

(7.5)

–

(19.0)

0.6

73.22

86.0

–3

–

(2.0)%

20.1%

$0.97

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 2016. 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@cpushareownerservices.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

SHARE REGISTRY

Computershare Investor Services Pty Limited
Yarra Falls 452 Johnston Street
Abbotsford Victoria 3067 Australia

GPO Box 2975
Melbourne Victoria 3001 Australia
Telephone +61(0)3 9415 4027
Or 1300 556 050 (for callers within Australia)
Facsimile +61(0)3 9473 2500
Email web.queries@computershare.com.au

DESIGN ERD.COM.AU PRINT BAMBRA PRESS