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Annual Report 2023
Alumina Limited
CONTENTS
01 About Alumina Limited
02
Focused investment in AWAC
04 Chairman and CEO Report
06
Sustainability
08 Directors’ Report
18 Operating and Financial Review
42 Remuneration Report
66
Financial Report
97 Directors’ Declaration
98
Independent Auditor’s Report
104 Financial History
1
ABOUT
Alumina
Limited
Alumina Limited has a
unique investment in some
of the world’s highest
quality alumina assets
The Annual Report is presented in
US dollars, unless otherwise specified.
Alumina Limited is the 40% partner in the AWAC joint
venture with a portfolio of assets in Australia, Brazil,
Spain, Saudi Arabia and Guinea, including globally
leading bauxite mines and alumina refineries. Alumina
Limited is an Australian company listed on the Australian
Securities Exchange (ASX) and trades on the OTC
Market in the US. AWAC also has a 55 per cent interest
in the Portland aluminium smelter in Victoria, Australia.
AWAC’s joint venture partner and operator is Alcoa
Corporation. The AWAC joint venture was formed in
1994 and our relationship with Alcoa dates back to
the early 1960s when Western Mining Corporation
(now called Alumina Limited) began to explore bauxite
deposits and other resources in the Darling Ranges
of Western Australia. 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 through acquiring the interests of other
minority participants, other than Alcoa.
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.
Alumina Limited was created on 11 December 2002
when WMC Limited’s alumina assets were demerged
from the nickel, copper and fertiliser businesses.
2
AT A GLANCE
Focused
investment
in AWAC
In 2023 Alumina Limited
posted a net loss after tax
of $150.1 million compared
to a net profit after tax of
$104.0 million in 2022.
Excluding significant items, net loss after
tax would have been $91.9 million dollars
(2022: $109.3 million net profit after tax).
The Company did not declare a dividend
in respect of the 2023 year.
Alumina Limited Results
$150.1 M
2023 net loss after tax
2022: $104.0 million net profit after tax
$159.1M
2023 net cash contributions to AWAC
2022: $166.5 million net distributions
Nil
2023 dividends declared
2022: 4.2¢ per share
$294.3M
2023 net debt
2022: $106.2 million
Alumina LimitedAnnual Report 2023 3
AWAC’s EBITDA for 2023 was $164.5 million
(2022: $817.1 million) and excluding
significant items would have been $209.5
million (2022: $814.6 million). The decrease
in AWAC’s 2023 net profit is principally
attributable to reduced alumina production
and higher cash costs of production.
In 2023, alumina prices were tightly range bound,
with a maximum of between $371 per tonne and a
minimum of $325 per tonne for Platts WA FOB. The
average Platts WA FOB was $343 per tonne (2022:
$362 per tonne). The average realised alumina price
was $352 per tonne in 2023, a decrease of 5.1%
relative to 2022.
AWAC’s cash cost of alumina production increased
by 1.3% to $308 per tonne. Key factors driving this
were lower bauxite grade, higher caustic prices and
conversion costs.
The margin1 was $44 per tonne of alumina (2022:
$67 per tonne).
AWAC Results (USGAAP)
$317.8M
2023 net loss after tax
2022: $301.1 million net profit after tax
$(9.9)M
2023 AWAC cash from operations
2022: $481.5 million
$352 PER TONNE
2023 realised Alumina price
2022: $371 per tonne
$209.5M
2023 AWAC EBITDA excl significant items
2022: $814.6 million
1. Calculated as average realised price less cash cost of production.
4
Alumina Limited
Chairman and
CEO Report
2023 was a highly challenging year for our company.
Accordingly, we took steps to weather the storm
and we supported the hard decisions necessary
to turnaround AWAC’s performance.
Safety
In 2023 there were no fatalities and AWAC has
maintained fatality free operations since 2017. There
was one serious injury and AWAC is continuing to
focus on improving its performance, including in
relation to issues such as chemical burns which have
been challenging for AWAC and the industry
more generally.
Weathering the storm
AWAC’s alumina production of 10.3 million tonnes
in 2023 was a decline of 1.5 million tonnes compared
to the previous year. This was a result of a controlled
reduction in Kwinana production due to a shortage
of gas, the processing of lower grade bauxite in
Western Australia, San Ciprian operating at around
50% capacity due to high natural gas prices and
conveyor failure at the port in Alumar.
Alumina Limited was required to make $159.1
million net contributions to AWAC entities during
the year (2022: net receipts $166.5 million dollars),
disappointingly resulting in insufficient free cash flow
to facilitate a dividend payment to shareholders.
We were, however, well placed to weather the storm.
In June, 2023 we renegotiated our existing bank
facility, increasing our total facility limit from $350
million to $500 million. As of 31 December 2023,
our net debt was $294.3 million with maturities ranging
from October 2025 to June 2027.
Transitioning approval processes –
Western Australia
In December 2023, we were pleased to announce
that the Western Australian government had granted
Alcoa of Australia approval for its 2023-2027 Mining
and Management Program (MMP), in respect of the
Huntly and Willowdale bauxite mines.
Subsequently, the government also granted an
exemption to allow AWAC to continue its mining
operations while the WA Environmental Protection
Authority (EPA) assesses the MMP. This resolved
a significant level of uncertainty which had cast a
shadow over the Company for much of 2023.
Under the approvals, AWAC agreed to a range
of conditions addressing key environmental factors
that include the protection of drinking water and
biodiversity along with accelerated forest rehabilitation.
These commitments provide significantly enhanced
environmental protections, allowing a transition to a
more contemporary process for future mining areas.
AWAC continues to progress approvals for its next
major mine regions (Myara North and Holyoak) through
the contemporary WA EPA process, with the highest
level Public Environmental Review being applied.
Improving the portfolio for the future
The focus now for AWAC and our Company is
continuing to take action to improve our portfolio.
In December 2023, Alcoa announced that actions are
being undertaken to further reduce losses in relation to
the San Ciprian refinery. This work continues, including
ongoing discussions with workers unions and relevant
government agencies.
Annual Report 2023 5
On 9 January 2024, Alcoa of Australia made the difficult
decision to fully curtail the Kwinana Alumina Refinery
in Western Australia. Kwinana had been the foundation
stone for AWAC’s operations in Western Australia since
it was commissioned in 1963.
Through this time Kwinana, provided valuable feedstock
for AWAC’s Point Henry and Portland Smelters, as well as
other third-party customers. It had a nameplate capacity of
2.2 million tonnes of alumina, and throughout its lifetime
had produced approximately 95 million tonnes of alumina,
which would equate to roughly 47.5 million tonnes of
aluminium, or approximately 3,393 billion beer cans.
Unfortunately, a combination of age, scale, maintenance
and bauxite grades had increased its costs of production
to an uneconomic and unsustainable level.
We thank all those who worked at Kwinana and
acknowledge their dedication and service to AWAC
over the years.
Board updates
On 15 January 2024, we were pleased to welcome Alistair
Field to the Board. Mr Field brings extensive operational
experience and commercial acumen and his appointment
was an important step in the Board’s succession and
renewal plan.
Robust markets
Aluminium remains vital in a decarbonised world.
An example of this is that in December 2023, the
Australian Government released a new Strategic Materials
List1 which includes aluminium, among other materials,
as an essential commodity for the world’s clean energy
technologies, such as solar, batteries and electric
vehicles, and electrical transmission.
In 2023, the alumina market was relatively tight, with
alumina prices, ranging between $325 and $371 per
tonne for Platts WA FOB. In the first half, alumina prices
increased as a result of curtailed Kwinana production,
however prices then decreased in response to weaker
aluminium demand. In the second half of the year, prices
increased due to increased demand from Chinese
smelters, bauxite supply concerns in Guinea and supply
disruptions in China. We expect the market to remain tight
in 2024. No new RoW greenfield metallurgical alumina
project is expected in 2024. Brownfield expansions
and production ramp-ups are likely to be somewhat
offset by supply disruptions in Australia. With steady
demand growth from primary aluminium smelters,
RoW metallurgical alumina market in 2024 is forecast
to be in further deficit compared to 2023.
The Alcoa Offer
Shareholders will be aware that Alumina has entered into
a scheme implementation deed with Alcoa Corporation in
relation to a proposal for Alcoa to acquire Alumina. Under
the terms of the deed, eligible Alumina shareholders will
be entitled to receive Alcoa common stock in the form
of ASX-listed Alcoa CHESS Depositary Interests (CDIs).
Alcoa has agreed to establish a foreign exempt listing
on the Australian Securities Exchange (ASX), which would
enable Alumina shareholders to trade shares of Alcoa
common stock via CDIs on the ASX, in the same way
they would normally trade ASX-listed Alumina shares.
Further information about the proposal is set out in
Alumina’s ASX release of 12 March 2024 and the Alumina
website at www.aluminalimited.com/alcoa-offer/.
The Board has considered the proposal in great detail
and is working towards an outcome that is most beneficial
to Alumina shareholders.
W Peter Day
Chairman
Mike Ferraro
Chief Executive Officer
1. Strategic Material List identifies important minerals for the global transition to net zero and priority technologies, for which Australia
has geological potential, in demand from strategic international partners, but which are not at risk of supply chain disruptions.
6
Sustainability
ESG Investor Briefing
In 2023 Alumina Limited held its third annual ESG
Investor Briefing (available on the Company’s website),
focussing on key current and emerging ESG matters
for Alumina Limited and AWAC, including biodiversity
and rehabilitation, energy and emissions intensity,
water management and modern slavery/human rights.
The ESG Briefing highlighted AWAC’s unique
concentration of low-cost and low emissions refineries
with AWAC emissions intensity metrics continuing
to improve.
The ESG Briefing also provided an update on
impoundment management. Impoundment
management has been a key focus of the Board of
Alumina Limited for a number of years. The Company
understands the seriousness of the joint venture
operating large scale residue storages areas and the
importance of safety and meeting standards. Alcoa, as
an ICMM member, voluntarily committed to conform to
the Global Industry Standard on Tailings Management
(GISTM). As part of this commitment, all AWAC tailings’
dams with a consequence category rating of ‘Very
high’ or ‘Extreme’ were compliant by August 2023.
This was an important achievement for the joint
venture, with the remaining facilities due to be in
conformance by August 2025.
Alumina LimitedAnnual Report 2023 7
Modernising processes and practices –
Western Australia
The upcoming curtailment of the Kwinana refinery
will further reduce AWAC’s emissions.
Engagement with relevant government agencies on
mine plan and related approvals was a key focus for
AWAC during 2023. Alumina Limited provided regular
updates on progress, including at its 2023 Half-Year
Results. Alumina Limited announced on 14 December
2023 that the Western Australian Government had
made decisions allowing AWAC to continue bauxite
mining and downstream alumina refining in WA, with
AWAC committing to a range of conditions addressing
key environmental factors including the protection of
drinking water and biodiversity along with accelerated
forest rehabilitation.
Safeguard mechanism
In July 2023, The Australian Government implemented
its reforms to the Safeguard Mechanism. The key
aspect of the reforms is to require large industrial
“Safeguard Facilities” to keep direct greenhouse gas
emissions at or below baselines in line with Australia’s
climate targets of 43% below 2005 levels by 2030 and
net zero by 2050. Safeguard Facilities are required
to reduce their emissions in a manner known as the
“hybrid model”.
Whilst all AWAC’s Australian facilities (except the
Willowdale mine) are captured within the policy,
AWAC’s alumina refineries are all below industry
average, having the lowest emissions intensity
in Australia. As a result, the policy is expected
to have minimal impact on AWAC’s operations.
Aluminium Stewardship Initiative (ASI)
In 2023, the Portland smelter and CBG mine (non-
AWAC operated) both received ASI certification.
The ASI works together with producers, users and
stakeholders in the aluminium value chain to
collaboratively foster responsible production,
sourcing and stewardship of aluminium. All nine
of AWAC’s operating locations are now certified
to the ASI Performance Standard.
IAI Greenhouse Gas Initiative
The International Aluminium Institute (IAI) launched
a new initiative to transparently and publicly track
the ambition and progress of its member companies’
greenhouse gas emission reductions.
By signing up to IAI’s initiative in December 2023,
Alumina Limited demonstrated its commitment to
continue to focus on transparency and reporting of
its emissions whilst striving to achieve its net zero
by 2050 ambition.
This commitment aligns with Alumina Limited’s own
goals and emphasises that the aluminium industry as
a whole understands the importance of transparency
and continuing to take meaningful actions to achieve
global climate targets.
8
Directors’
Report
The Directors present their report on the
consolidated entity consisting of Alumina
Limited (the Company) and the entities it
controlled at the end of, or during, the year
ended 31 December 2023 (the Group).
Board of 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.
Alumina LimitedAnnual Report 2023 9
Mr W Peter Day
Chairman and Independent
Non-Executive Director
Qualifications
LLB (Hons), MBA, FCA, FCPA, FAICD
Mr Chen Zeng
Non-Executive Director
Qualifications
MIF
Responsibilities
Mr Day was appointed as a Director of the
Company on 1 January 2014 and was appointed
Chairman of the Board on 1 April 2018. He is a
member of the Nomination, Compensation and
Audit & Risk Management Committees and Chair
of the Sustainability Committee.
Relevant other directorships
Mr Day is currently Non-Executive Chairman of
Australian Unity Investment Real Estate (appointed
September 2015), and a former Director of:
Ansell (August 2007-August 2021), Boart Longyear
(February 2014-September 2017), Federation Centres
(October 2009-February 2014), Orbital Corporation
(August 2007-February 2014) and SAI Global
(August 2008-December 2016).
Career
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 Chief Financial
Officer (CFO) of Amcor. He also supports initiatives in
health and disability services, and mentoring.
Responsibilities
Mr Zeng was appointed as a director of the Company
on 15 March 2013. He is a member of the Nomination,
Compensation, Sustainability and Audit and Risk
Management Committees (appointed 7 August 2014).
Relevant other directorships
Mr Zeng is the Chairman and President of CITIC Pacific
Limited, the Chairman and Chief Executive Officer of
CITIC Pacific Mining Management Pty Ltd and its holding
company, CITIC Mining International Ltd. He also serves
as the Chairman of CITIC Australia and Dah Chong
Hong Holdings Limited.
Career
Mr Zeng joined one of China’s largest conglomerates,
CITIC Group Corporation in 1989 and has spent over
20 years with CITIC Australia. He has played a pivotal
role in CITIC’s investments in Macarthur Coal Limited and
Alumina Limited. In 2014, Mr Zeng was appointed CEO
of CITIC Pacific Mining, the developer and operator of
CITIC’s Sino Iron project, the largest magnetite mining,
processing and export operation in Australia. In 2019, he
became Chairman and President of CITIC Pacific Limited.
Before joining CITIC Pacific Mining, Mr Zeng was an
Executive Director of Hong Kong-listed CITIC Limited
and a Director of CITIC Group, as well as Executive
Director, Vice Chairman and Chief Executive Officer of
CITIC Resources Holdings Limited. Mr Zeng also served
as a Non-executive Director of CITIC Dameng Holdings
Limited (now known as South Manganese Investment
Limited), Marathon Resources Limited (now known as
Leigh Creek Energy Limited) and Macarthur Coal Limited.
Mr Zeng has been working in the Australian resources
sector since 1994 across aluminium smelting, iron ore
mining and processing and coal mining. He has extensive
experience in business management in industries
including mining, steel, property, energy and consumer
products, as well as a proven track record leading diverse
business teams and cross-cultural professionals.
10
Ms Deborah O'Toole
Independent Non-Executive
Director
Qualifications
LLB, MAICD
Mr John A Bevan
Independent Non-Executive
Director
Qualifications
BCom
Responsibilities
Ms O’Toole was appointed as a director on
1 December 2017. She is a member of the Nomination,
Sustainability, and Compensation Committees and
Chair of the Audit and Risk Management Committee
(from 1 April 2018).
Relevant other directorships
Ms O’Toole is a Non-Executive Director of Sims Limited
(appointed November 2014). She also serves as Chair
of Transurban Queensland, and as an independent
director of Credit Union of Australia Ltd (appointed
March 2014), Non-Executive Director of Sydney Airport
(appointed August 2022) and Pacific National Rail
Group. Ms O’Toole is a former Non-Executive Director
of Boral Limited (September 2020-October 2021),
Boart Longyear Limited (appointed October
2015-September 2017), Wesley Research Institute
(appointed March 2013-November 2019), CSIRO,
Norfolk Group, various companies in the MIM and
Aurizon Groups and Government and private sector
advisory boards.
Career
Ms O’Toole has extensive executive experience across
a number of sectors including over 20 years in the
mining industry and, in transport and logistics which
included managerial, operational and financial roles.
She has been CFO of three ASX listed companies:
MIM Holdings Limited, Queensland Cotton Holdings
Limited and Aurizon Holdings Limited.
Responsibilities
Mr Bevan was appointed as an independent, Non-
Executive Director on 1 January 2018. He is a member
of the Audit and Risk Management Committee, the
Compensation Committee, the Sustainability Committee
and the Chair of the Nomination Committee (from
1 April 2018).
Relevant other directorships
Mr Bevan is currently a Non-Executive Director of
Balmoral Iron Pty Ltd (appointed 2022), a former
Non-Executive Director and Chairman of Ansell
(Non-Executive Director August 2012-October 2023,
Chairman from November 2019-October 2023) and
BlueScope Steel (Non-Executive Director March
2014-November 2023, Chairman from November
2015-November 2023), and a former director of Nuplex
Industries Limited (September 2015-September 2016)
and a former Non-Executive Director of the Humpty
Dumpty Foundation (2017-December 2022).
Career
Mr Bevan was formerly the Chief Executive Officer
and Executive Director of Alumina Limited (June
2008-December 2013). Prior to his 2008 appointment
to Alumina Limited, he spent 29 years in the BOC
Group Plc where he was a member of the Board of
Directors and held a variety of senior management
positions in Australia, Korea, Thailand, Singapore and
the United Kingdom. Mr Bevan brings to the Board
extensive commercial and operational experience
gained through operating joint ventures in many parts
of the world, particularly Asia.
Alumina LimitedAnnual Report 2023 11
Mr Alistair Field
Independent Non-Executive
Director
Qualifications
Mech Eng, MBA
Responsibilities
Mr Field was appointed as an independent,
Non-Executive Director on 15 January 2024.
He has been appointed a member of the Audit and
Risk Management Committee, the Compensation
Committee, the Sustainability Committee and the
Nomination Committee. Mr Field was appointed Chair
of the Sustainability Committee on 20 February 2024.
Relevant other directorships
Mr Field is currently an independent Non-Executive
Director of BlueScope Steel (appointed January 2024).
Career
Mr Field has most recently held the position of
Chief Executive Officer and Managing Director of
Sims Limited. Mr Field has more than 25 years of
experience in the mining, metals and manufacturing
sectors. Prior to joining Sims Limited, he held a number
of senior leadership positions including as Director for
Patrick Terminal & Logistics division for Asciano Limited
and as Chief Operating Officer of Rio Tinto’s Bauxite
and Alumina Division. Mr Field is also a member of the
Australian Climate Leaders Coalition, Champions of
Change Coalition, Manufacturing Australia, and the
World Business Council for Sustainable Development.
Ms Shirley E In’t Veld
Independent Non-Executive
Director
Qualifications
BCom LLB (Hons)
Responsibilities
Ms In’t Veld was appointed as an independent,
Non-Executive Director of the Company on
3 August 2020.
Relevant other directorships
Ms In't Veld is currently a Non-Executive Director
with APA Group Limited (appointed 19 March 2018),
Develop Global Ltd (appointed July 2021) and
Canadian listed company, Karora Resources Inc.
(appointed December 2021). She was formerly Deputy
Chair of CSIRO (term ceased 30 June 2020), a Non-
Executive Director of Northern Star Resources Limited
(September 2016-June 2021), NBN Limited (December
2015-December 2021), Perth Airport, DUET Group,
Asciano Limited and a Council Member of the Chamber
of Commerce and Industry of Western Australia.
Career
Ms In’t Veld was the Managing Director of Verve
Energy (2007-2012) and, before that, she worked for
10 years in senior roles at Alcoa of Australia, WMC
Resources Ltd, Bond Corporation and BankWest.
In 2014, she was Chairman of the Queensland
Government Expert Electricity Panel and a member
of the Renewable Energy Target Review Panel for the
Department of Prime Minister and Cabinet. Ms In’t Veld
brings extensive experience in the aluminium industry,
energy markets and management of long-life assets,
as well as expertise in renewables, research and
innovation to the Board.
Ms In’t Veld is a member of the Audit and Risk
Management Committee, Nomination Committee
and Sustainability Committee and Chair of the
Compensation Committee (appointed 26 May 2021).
12
Mr Mike Ferraro
Managing Director and
Chief Executive Officer
Qualifications
LLB (Hons)
Ms Katherine Kloeden
General Counsel/
Company Secretary
Qualifications
BCom LLB (Hons), CPA, GAICD
Career
Mr Ferraro is currently the President of the
Australian Aluminium Council, a board member
of the International Aluminium Institute and a
director of Alcoa of Australia.
Prior to his appointment as CEO and Managing
Director, Mr Ferraro was a Non-Executive Director
of Alumina Ltd from 5 February 2014 to 31 May 2017
and Partner, Client Development-Asia Pacific at
Herbert Smith Freehills, a global law firm. He was
also formerly global head of the firm’s Corporate
Group and a member of its executive management
team. Mr Ferraro is also a former Non-Executive
Director of Helloworld Travel Limited (January
2017-October 2021).
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.
Responsibilities
The role of Company Secretary/General Counsel
for 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; and
· managing compliance with regulatory
requirements. Ms Kloeden is also responsible
for ESG, risk and human resources at
Alumina Limited.
Career
Ms Kloeden joined Alumina as General Counsel and
Company Secretary in June 2023. She has over 20
years’ of legal and commercial experience, including
nearly 10 years in the mining industry. Prior to joining
Alumina, Ms Kloeden held senior legal roles at BHP
Billiton Ltd, Insurance Australia Group Limited and
Latitude Financial Services.
Alumina LimitedAnnual Report 2023 13
Interests of Directors
Indemnity of Officers
Particulars of relevant interests in shares in the
Company, or in any related body corporate held by
the Directors 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 as at the date of this report are set out
in the Remuneration Report on page 59 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 other employees. 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.
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 only applies 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 and its
senior executives, which indemnify them consistently
with rule 75 of the Constitution.
14
ALUMINA LIMITED DIRECTORS’ ATTENDANCE AT
MEETINGS JANUARY TO DECEMBER 2023
Board meeting
Audit and Risk
Committee meetings
Compensation
Committee meetings
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
17
17
17
17
17
17
15
17
17
17
16
16
7
7
6
7
2
2
1
2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
7
7
7
7
6
6
2
2
2
2
2
2
Nominations
Sustainability
Committee meetings
Committee meetings
Eligible
to attend
Attended
Attended
Eligible
to attend
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
Directors
C Zeng
P Day
M Ferraro1
D O’Toole
J Bevan
S In’t Veld
1. Mr Ferraro is Managing Director and Chief Executive Officer and is not a member of the Committees of the Board however typically
attends in his capacity as CEO.
Meetings of Directors
Particulars of the number 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 above.
Dividends
There were no dividends paid to members of
the Company, recommended or declared during
the financial year.
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.
Review of operations and results
The financial results for the Group include the
12-month results of AWAC and associated corporate
activities. The Group’s net loss after tax for the 2023
financial year attributable to members of the Company
was US$150.1 million (2022: US$104.0 million net
profit after tax). Excluding significant items, there
would have been a net loss after tax of US$91.9 million
(2022: US$109.3 million net profit after tax). 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
41 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 93), 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 2023.
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
(including the Operating and Financial Review on pages
19 and 41 of this 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 2023.
Alumina LimitedAnnual Report 2023
ALUMINA LIMITED DIRECTORS’ ATTENDANCE AT
MEETINGS JANUARY TO DECEMBER 2023
Board meeting
Audit and Risk
Compensation
Committee meetings
Committee meetings
Directors
Attended
Attended
Attended
Eligible
to attend
Eligible
to attend
Eligible
to attend
C Zeng
P Day
M Ferraro1
D O’Toole
J Bevan
S In’t Veld
17
17
17
17
17
17
15
17
17
17
16
16
7
7
7
7
7
6
7
7
6
6
2
2
2
2
2
1
2
2
2
2
15
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Nominations
Committee meetings
Sustainability
Committee meetings
Eligible
to attend
Attended
Eligible
to attend
Attended
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
Environmental regulation
AWAC’s Australian operations are subject to
various Commonwealth and state laws governing
the protection of the environment in areas such
as air and water quality, waste emission and
disposal, environmental impact assessments, mine
rehabilitation, and access to and use of ground
water. In particular, most operations are required
to be licensed to conduct certain activities under
the environmental protection legislation of the state
in which they operate, and such licences include
requirements specific to the subject site. Approvals
may also be required under Commonwealth
environmental protection legislation.
Alumina Limited is a non-operating joint venture
partner that holds a 40 per cent interest in Alcoa World
Alumina and Chemicals (AWAC), a global enterprise.
Alumina Limited annually reports its equity interest
in the greenhouse gas emissions and energy
consumption to the CDP and on an AWAC basis
in the Company’s Sustainability Update (Report).
More information on environmental performance is
included in the Company’s latest Sustainability Update
available online at www.aluminalimited.com.
16
Rounding of amounts
The Company is of a kind referred to in the Australian
Securities and Investments Commission 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
legislative 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 is set out
on page 17 of this report.
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 Statements in the Financial
Report on page 92.
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 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 Statements in the Financial
Report on page 92.
Corporate Governance Statement
The Company has, for the 2023 reporting year, elected
to disclose the Corporate Governance Statement only
on the Company’s website.
The Corporate Governance Statement can be found at
www.aluminalimited.com/about-governance/.
Alumina LimitedAnnual Report 2023 17
AUDITOR’S INDEPENDENCE
DECLARATION
As lead auditor for the audit of Alumina Limited for the year ended
31 December 2023, 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.
Amanda Campbell
Partner PricewaterhouseCoopers
Melbourne
26 March 2024
PricewaterhouseCoopers ABN 52 780 433 757
2 Riverside Quay, Southbank VIC 3006 | GPO Box 1331 Melbourne VIC 3001
T: 613 8603 1000 | F: 61 3 8603 1999 | www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
18
CONTENTS
19
23
31
34
37
40
1. Strategy and business model
2. Principal risks
3. Review of AWAC operations
4. AWAC Financial Review
5. Alumina Limited Financial Review
6. Market, Outlook and Guidance
Note regarding non-IFRS
financial information
The Operating and Financial Review
contains certain non-IFRS financial
information. This information is
presented to assist in making
appropriate comparisons with
prior year periods and to assess
the operating performance of
the business.
Alcoa World Alumina and Chemicals
(AWAC) financial information is
extracted from audited financial
statements prepared in conformity
with accounting principles generally
accepted in the United States of
America (US GAAP).
Alumina LimitedAnnual Report 2023 19
Operating and
financial review
1. Strategy and business model
Matters requiring a super-majority vote include:
· 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
· 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 $50 million or greater1
· entry into related party transactions of $50 million
or greater
· entry into 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.
Business model
Alumina Limited represents a unique investment in
globally leading bauxite mines and alumina refineries
through its 40% investment in Alcoa World Alumina
and Chemicals (AWAC). AWAC also has a 55% interest
in the Portland aluminium smelter in Victoria, Australia.
The Company provides a clean look-through to
AWAC’s underlying performance. This is possible
because the financial policies of AWAC ensure there
is modest leverage in AWAC and the distribution
policies of AWAC require free cash flows to be paid
to its shareholders.
AWAC was formed on 1 January 1995 by WMC and
Alcoa Inc. combining their respective global bauxite,
alumina and alumina-based chemicals business and
investments and their respective aluminium smelting
operations in Australia. 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. Alcoa owns the 60% interest in the joint
venture and manages the day-to-day operations.
The Strategic Council is the principal forum for Alcoa
and Alumina Limited to provide direction and counsel
to the AWAC entities in respect of strategic and policy
matters. The 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.
1. In the case of curtailment, super-majority vote only applies
to full curtailment and does not apply where there have been
two consecutive quarters of loss at the relevant operations.
Map of
operations
GLOBAL
10.3M TONNES
alumina production1
7.6M BDT
3rd party bauxite
shipments
AWAC OPERATED
NON-AWAC OPERATED
Bauxite Mine
Smelter
Bauxite Mine
Refinery
Location
Refinery
ATLANTIC
2.1M TONNES
alumina production
7.6M BDT
3rd party bauxite
shipments
MRN2
Juruti
Alumar
Annual Report 202320Alumina Limited Alumina Limited has a
40 per cent joint venture
interest in AWAC's long-life
alumina refineries.
San Ciprian
Al Ba’itha
Ras Al-Khair
CBG
WESTERN
AUSTRALIA
Kwinana3
Huntly
Pinjarra
Willowdale
Wagerup
1. Excludes alumina production from the Ras Al-Khair refinery.
2. The sale of MRN was completed in 1H2022.
3. Kwinana curtailment announced on 9 January 2024.
PACIFIC
8.2M TONNES
alumina production
Portland
21 22
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), AWA Saudi Ltda. 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, and participate
in segment and location meetings.
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). The exclusivity
provisions would terminate immediately on and from
a change in control of either Alumina Limited or Alcoa.
Also, effective immediately on and from a change
of control of Alcoa or Alumina Limited there is an
increased opportunity for development projects
and expansions, whereby if either Alumina Limited
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.
Strategy analysis
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.
If there is a change of control of Alumina Limited then:
· Future alumina off-take rights, from a date nominated
by Alumina Limited, Alumina Limited 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,
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
— from a date nominated by Alumina Limited,
Alumina Limited 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 and pre-existing bauxite
sales contracts.
Alumina Limited is primarily focused on investing
in long-life, low-cost bauxite and alumina assets.
Alumina Limited does this currently through the
AWAC joint venture with its partner, Alcoa.
Alumina Limited and Alcoa are different
companies with different shareholders, different
governance requirements and different objectives.
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 global markets. 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.
Alumina LimitedAnnual Report 2023 23
2. Principal risks
The Group’s risk management processes are
summarised in the Corporate Governance
Statement located on the Company website at
www.aluminalimited.com/about-governance.
The Company maintains a formal Risk Management
Framework (RMF), which is overseen by the Audit
and Risk Management Committee (ARMC). The RMF
contains the following elements:
· Risk management policy, which is approved and
reviewed annually by the ARMC, as the delegate
of the Board of Directors.
· Document describing the risk management process
including reporting and escalation procedures.
· Risk management strategy, which explains how
Alumina identifies, mitigates, manages, monitors,
reports its material risks.
SUMMARY OF KEY BUSINESS RISKS
· Risk appetite statement, which contains risk appetite
and tolerance statements that are approved and
monitored by the ARMC.
· Risk profile, which captures the material risks of
Alumina, and for each risk provides a description, an
allocated risk owner, appropriate risk management
strategy, controls, a forward action plan, and an
inherent/residual risk rating based on probability
and impact of a risk eventuating.
Set out on pages 23 to 30 are some of the key business
risks faced by Alumina Limited that could adversely
affect the achievement of financial performance or
financial outcomes. There may be other risks not listed
on pages 23 to 30 associated with an investment in
Alumina Limited. In addition, certain risks have been
excluded as they contain confidential information,
or disclosure may result in unreasonable prejudice
to Alumina Limited.
Risk Title
Description
Response
AWAC seeks to identify ways in
which to lower costs of production
and thus achieve a low position on
the cost curve. A low position on the
cost curve allows AWAC to remain
competitive in the event of
unfavourable market movements.
Market Risks
Strategic
positioning
to market
exposure
Commodity Prices
AWAC’s, and hence Alumina Limited’s, performance is
predominantly affected by the market price of alumina, and
to some extent the market prices of bauxite and aluminium.
Market prices are affected by numerous factors outside of
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 by
competitors). An alumina and/or aluminium market in supply
surplus may lead to downward price pressure. Global growth may
slow, reducing aluminium consumption, and hence aluminium and
alumina demand, which may put downward pressure on bauxite/
alumina/aluminium prices. A fall in the market prices of bauxite,
alumina and aluminium can adversely affect Alumina Limited’s
financial performance.
In addition, new refineries to be built at low capital and operating
cost could increase the supply of alumina globally, which could
lead to a fall in the market price of alumina.
Emerging competitors, that may be subsidised directly or
indirectly by government, entering the alumina market may
cause overcapacity in the industry which may result in AWAC
losing sales or in depressed prices.
A technology breakthrough could lower Chinese alumina
production costs, creating a structural change in the alumina
and aluminium markets.
A sustained increase in freight costs could disadvantage
AWAC’s competitiveness.
24
Risk Title
Description
Response
Strategic
positioning
to market
exposure
continued
Foreign exchange
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, for example
the cost of bauxite which could affect Chinese refineries cost of
production, and the China alumina import parity price.
AWAC and Alumina Limited
generally do not undertake hedging
activities to manage this risk.
Customers
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 (including through backward integration)
or changes to sales agreements could adversely affect AWAC’s and
Alumina Limited’s financial performance. There is also a risk that
AWAC may not be able to fulfil contracted customer alumina
volume with AWAC’s own alumina production, and any shortfall
will need to be sourced from the third-party alumina market.
AWAC mitigates customer risk
by having a broad customer base
across many countries and regions,
and having low-cost refineries.
Additionally, remaining at the low
end of the alumina greenhouse gas
(GHG) emissions curve in the
longer-term may make AWAC
attractive to customers seeking
relatively lower GHG alumina.
Energy
security
Geopolitical
As AWAC operates in a Global environment, the Joint Venture
is exposed to geopolitical risks that affect markets and operations,
Geopolitical risk includes political instability, coups d’états, civil
unrest, strikes and work stoppages, expropriation, nationalization
of properties by a government, imposition of sanctions, changes to
import or export regulations and fees, renegotiation, revocation or
nullification of existing agreements, leases, licenses, and permits,
and changes to mining royalty rules or laws.
AWAC’s refineries and the Portland smelter are heavy consumers
of energy. There is a risk that there may be a lack of availability
of energy or cost competitive energy to service AWAC’s facilities.
This would be a threat to the viability and operation of assets
through constrained cash flow, and ultimately reduced dividends
to Alumina.
Additionally, in the future the requirement for low carbon
energy sources is expected to become more important. There
is a risk that the availability of low carbon energy sources may be
scarce, and hence they may command a high price. It may also
be possible that competitors gain access to low carbon energy
(or new lower emissions technology) before AWAC, which may
disadvantage AWAC from a carbon intensity and cost curve
perspective. Additionally, new low emissions technologies may
require large amounts of renewable electricity. There is a risk that
such energy sources may not be available in sufficient quantity or
at a competitive price.
AWAC’s energy requirements and
contracting is regularly reviewed
by Alcoa and Alumina through the
Strategic Council, and Strategy and
Operation meetings.
In Western Australia in particular,
AWAC enters into long-term energy
contracts, but may consider shorter-
term contracts if required. Conversely,
the San Ciprian refinery has shorter
term energy contracts and a higher
proportion of floating arrangements
that fluctuate with certain energy
price benchmarks. Alumar utilises
coal and fuel oil for energy which
can fluctuate with market prices.
Additionally, Alumina regularly reviews
relevant energy markets in order to
maintain an independent view.
AWAC is also exploring technology
changes, through its Refinery of the
Future project, aiming to allow the
electrification of its refineries. If
successful, this would reduce reliance
on fossil fuels such as natural gas.
Alumina LimitedAnnual Report 2023 25
Risk Title
Description
Response
Operational Risks
Some cost inputs are subject to
long-term, fixed price contracts to
increase the certainty of input pricing.
AWAC and Alumina Limited generally
do not undertake hedging activities
to manage this risk.
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 seeks to ensure that
operations as a whole remain
competitive.
AWAC also invests in capital
expenditure projects intended to
maintain assets and reduce cash
costs over the long-term.
AWAC has policies in place to
maintain inventory, multiple
suppliers, insurance, and long-term
maintenance and CAPEX programs.
Alumina Limited has representatives
on AWAC boards, and has frequent
briefings in respect of permits.
AWAC entities, such as Alcoa of
Australia, have meetings with relevant
regulators to discuss mining permits.
Operating
costs
Production
Regulatory
approvals and
permits
AWAC’s operations are subject to conditions beyond its control
that may increase its costs (including due to foreign exchange
rates) 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
and bauxite), weather and natural disasters, fires or explosions
at facilities, unexpected maintenance or technical problems,
unplanned operational failure, 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.
AWAC may also be required from time to time to invest in
sustaining capital expenditure projects in order to maintain the
production levels of our facilities, asset integrity, and AWAC’s
position on the relevant cost curve. Significant capital expenditure
may reduce distributions to Alumina Limited from AWAC whilst
projects are being funded.
Examples of such capital expenditure include mine/crusher
moves, impoundments (including press filtration), energy
generation, or projects to abate AWAC’s carbon emissions.
Capital expenditure may be greater than planned and expected
results, including production rates, may not be achieved.
Increases to operating costs reduce the profitability of AWAC,
which decrease distributions to Alumina.
Major operational failures may restrict the output of alumina or
aluminium. These may be caused by mechanical or plant failure,
an “act of God”, supply chain disruptions, pandemics, material
decline (or denial of access) in bauxite reserves, industrial relations
disputes, regulatory issues, deferral of expenditures, or the loss
of key personnel.
Such unplanned operational failures may reduce AWAC’s
current earnings and distributions to Alumina Limited.
AWAC’s operations (particularly its mining operations) are
subject to extensive permitting and approval requirements.
These include permits and approvals issued by various
government agencies and regulatory bodies at the federal,
state, and local levels of governments in the countries in which
we operate. The permitting and approval rules are complex,
are often subject to interpretations by regulators, which may
change over time, and may be impacted by heightened levels
of regulatory oversight and stakeholder focus on addressing
environmental and social impacts of mining activities. Changing
expectations and increased information required by regulators
could make AWAC’s ability to comply with the applicable
requirements more difficult, inhibit or delay our ability to obtain
the necessary approvals, if at all, result in approvals being
conditioned in a manner that may restrict AWAC’s ability to
efficiently and economically conduct its activities, require us to
adjust our plans, or preclude the continuation of certain ongoing
operations or the development of future operations. Failure to
obtain, maintain, or renew permits or approvals, or permitting
or approval delays, restrictions, or conditions may impact the
availability and/or quality of the bauxite AWAC is able to mine
and could increase AWAC’s costs, potentially having a materially
adverse impact on AWAC operations and profitability.
26
Risk Title
Description
Response
Alumina Limited has representatives
on AWAC boards, and has frequent
briefings in respect of permits.
AWAC entities, such as Alcoa of
Australia, have meetings with relevant
regulators to discuss mining permits.
Regulatory
approvals and
permits
continued
In addition, the permitting processes, restrictions, and
requirements imposed by conditional permits or approvals,
and associated costs and liabilities, may be extensive and may
delay or prevent commencing or continuing exploration or
production operations, which could adversely affect AWAC’s
mining operations and production, and consequently its refining
operations, and could require it to curtail, close, or otherwise
modify its production, operations, and sites.
Additionally, AWAC’s existing permits, approvals and licences may
be rescinded or modified, or our mining plans may be adjusted, to
mitigate against adverse impacts to sites within or near our mining
areas that have environmental, biodiversity, or cultural significance,
potentially having a materially adverse impact on AWAC
operations and profitability.
For example, Alcoa of Australia seeks annual approvals from
the Western Australia government for rolling five-year mine plans
to maintain operations at the Huntly and Willowdale bauxite mines.
This statutory annual mine approvals process for Alcoa of Australia’s
2023-2027 Mining and Management Program (MMP) took longer
than it had taken historically due to increased requirements and
expectations from stakeholders with respect to certain
environmental matters. As a result of the prolonged approval
process, Alcoa of Australia began mining lower grade bauxite
in April 2023, which impacted Alcoa of Australia’s refineries by
increasing the use of caustic, energy, and bauxite and decreasing
alumina output. Alcoa of Australia’s 2023-2027 MMP was approved
in December 2023, and in connection with such approval, Alcoa
of Australia is subject to certain new requirements to address key
environmental factors, such as enhanced protections for drinking
water, increased distances from reservoirs, biodiversity, and
accelerated forest rehabilitation. On 18 December 2023, the
Western Australian Environmental Approval Authority (“EPA”)
announced it is assessing the MMP. Separately, Alcoa of Australia
has referred its next major mine move to Myara North and Holyoake
to the EPA for assessment. Approvals are also required from the
Commonwealth Department of Climate Change, Energy, the
Environment and Water (“DCCEEW”).
There remains a risk that future annual mine approvals, related
forest clearing permits, EPA and/or DCCEEW and/or other
required approvals will be delayed or conditioned (if obtained).
Any such failure to obtain, maintain, or renew permits; restrictions
or conditions imposed through the process or on approvals and
permits obtained and/or ongoing delays in approval or permitting
processes may further delay, impede or prevent commencing,
continuing or expanding mining and/or refining operations and
further impact the quality and/or availability of the bauxite AWAC
is able to mine, potentially having a materially adverse impact
on AWAC.
Security &
data breach
Loss of technological advantage, operations on site or proprietary
data due to organised espionage or breach of IT systems through
cyber-attacks.
Alcoa, as the manager of AWAC,
maintains a full suite of IT system
controls to mitigate against this risk.
Similarly, Alumina Limited maintains
a suite of controls to mitigate against
IT threats.
Alumina LimitedAnnual Report 2023 27
Risk Title
Description
Response
Safety Risk
AWAC operates mines and industrial facilities in inherently
dangerous environments, and operational failures may result
in injury or fatality involving AWAC staff, contractors, customers
or community.
Such an event may lead to fines against AWAC, alterations to
licence conditions including shut downs, loss of reputation
and licence to operate, and damages payable to parties.
Alcoa, as manager of AWAC,
maintains a system of policies,
procedures, controls and reporting
to identify risks associated with
safety and to mitigate against
a incident occurring.
Legal, tax & compliance risk
Legal, tax, &
compliance
Joint venture
AWAC
Structure
AWAC and Alumina Limited operate across a broad range
of legal, regulatory, disclosure laws and 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, additional tax liabilities or becoming subject to unexpected
or rising costs associated with business operations or provision of
health or welfare benefits to employees, regulations or policies.
AWAC and Alumina Limited are 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 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, additional tax liabilities 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.
Alcoa, on behalf of AWAC maintains
policy and procedural documentation
designed to comply with regulations,
for example health and safety
regulations, and environmental
regulations.
Additionally, Alumina maintains
a tax governance framework, and
external tax advisors.
Material compliance matters are
reviewed at the Strategic Council
and other forums.
Refer to "Commitments and
contingent liabilities for AWAC"
on page 93.
AWAC’s shareholders, Alumina Limited and Alcoa, are different
entities. Whilst Alumina Limited’s sole investment is in AWAC,
Alcoa is invested in a broader range of activities, hence interests
may not be aligned.
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. Additionally, exclusivity provisions within the
joint venture agreements may impede growth outside of the
AWAC joint venture.
There is also a risk that 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.
Alumina
Limited is
liable for
further capital
equity calls
under the
AWAC
agreements
AWAC may make equity calls of Alumina and Alcoa Corporation.
Alumina Limited approval is only required for equity calls of any
AWAC company totalling in any one year more than US$1 billion.
Alumina Limited regularly
engages with Alcoa to understand
future cash flow forecasts.
Alumina is required to fund its share of calls, subject to the
provisions of the AWAC Agreements. If Alumina is unable or
unwilling to fund its share of capital requirements, it may ultimately
run the risk of its equity interest in AWAC being diluted according
to certain formulas within the joint venture agreements.
Additionally, Alumina Limited
regularly reviews its own capital
requirements and capital
management policies.
28
Risk Title
Description
Response
Insufficient
Cash
Generation
There is a risk that as a result of a number of factors including
high operating costs, higher than expected sustaining capital
expenditure and/or low commodity prices, that AWAC may not
generate sufficient cash flow to pay distributions to partners.
Sustainability
Environmental,
Social,
Governance
(ESG)
AWAC operates facilities in several areas of the globe. AWAC’s
facilities may be resource intensive, subject to regulatory and
community standards, located in environmentally sensitive areas,
and/or close to communities.
AWAC’s operations generate hazardous waste which are contained
in tailing facilities, residue storage areas and other impoundments.
Unanticipated structural failure or over-topping caused by extreme
weather events could result in injury or loss of life, damage to the
environment or property.
Failure to meet ESG regulations may result in material civil or
criminal fines, penalties, loss or restrictions or conditions being
imposed on licences and permits and curtailment or closure
of facilities, or the loss of AWAC’s “social licence to operate”.
The social licence to operate (SLO) is an understanding/
perception of key stakeholders regarding the company’s
activities and its delivery of key commitments on a range of
issues (e.g. engagement with local communities including mutual
benefits, protection of heritage areas, maintenance of biodiversity,
interactions with indigenous peoples). Degradation of a SLO
could eventually lead to the loss of an operational licence
(or other penalties), and damage to reputation which could
limit future prospects.
Alumina Limited regularly monitors
AWAC’s cash cost and other
measures such as cash cost.
Alcoa often executes programs of
austerity to respond to downturns in
economic cycles, which may involve
rationalisation of the portfolio,
delaying non-critical CAPEX or
other cash saving measures.
AWAC has extensive policies and
systems in respect of ESG matters.
Additionally, Alcoa is a member of
the International Council on Mining
and Metals (ICMM), which is an
organisation focused on enhancing
mining’s contribution to society.
Alcoa has also rolled out its Social
Management System (SMS, SP360)
at all AWAC locations.
The SMS incorporates governance
resources including corporate
policies and standards, governing
body oversight matched with defined
procedures and assessments. The
SMS includes the definition of
performance metrics and long-term
goals to be accomplished between
2025 and 2030.
Alcoa reports instances of
environmental non-compliance
to Alumina Limited, and any
appropriate response.
Alumina meets with Alcoa regularly
to discuss material issues, and
Alumina produces an annual
Sustainability Update which involves
the review of many key performance
metrics in respect of ESG.
Climate
change risk
Climate change is a systemic and material risk that will pose
challenges in the future management of AWAC operations in
regard to energy usage, GHG emissions, carbon pricing policies
and regulations and market demand. Climate change results in
a number of physical and transitional risks, which affect AWAC
in the following manner.
Physical risks include:
Physical risks include increased risks to personnel, business
continuity, production and facilities. Climate factors like extreme
weather events are likely to have an impact on AWAC’s global
mining and refining operations. This may include water stress,
increased risks relating to residue disposal and production and/or
supply chain risks from extreme weather events and changes in
rainfall/sea levels.
Alumina LimitedAnnual Report 2023 29
Risk Title
Description
Response
A key mitigation against AWAC’s
physical and transitional risks is to
remain as low as possible on the
refining cash cost and emissions
intensity curves.
Additionally, Alumina Limited
and Alcoa have both stated their
ambitions to achieve “net zero” by
2050 in respect of CO2e emissions.
In order to do so, AWAC will need
to identify alternate energy sources
to displace the fossil fuels that it
currently relies on, in particular
for its refineries.
In respect of its refineries, AWAC
is investing in R&D through its
Refinery of the Future project to
look for opportunities to electrify
elements of a refinery, reduce energy
or emissions, and utilise renewable
electricity as opposed to the natural
gas, coal and fuel oil that AWAC
currently uses.
Investment in such technology
is important to mitigate against
physical and transitional risks.
Potential Refinery of the Future
technologies could help maintain
AWAC’s low position on the emissions
intensity curve means that AWAC’s
products remain attractive to end
users, reducing the risk of substitution
to other metals, or the imposition
of a material carbon price.
Climate
change risk
continued
Transitional risks include:
· the increased scrutiny by governments on GHG emissions
and the establishment of a carbon pricing, or other
government regulation/intervention
· substitution from one product to another
· changes in consumer preferences, including consumer
action/protest against a particular product
· cost of emissions abatement and technology
· rising cost, or availability of energy.
Energy 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 (e.g. any potential changes to the Australian
Government’s Safeguard Mechanism) may represent an increased
cost to AWAC and may affect Alumina Limited’s profitability.
Technology risk exposure is the risk of substituting existing
products and services with lower-emissions options. If AWAC is
unable to remain low on the alumina GHG emissions curve, there is
a risk that customers may choose alternate suppliers. Alternatively
demand, and consequently the price of alumina may decrease.
Though the Joint Venture is investing in technology to reduce the
production of greenhouse gases in the manufacture of our products,
such as the Refinery of the Future technologies that are designed
to limit the production of carbon in alumina refining, in certain
aspects of our operations, the Joint Venture's ability to reduce our
GHG emissions is also dependent on the actions of third parties,
especially energy providers, and the ability to make significant
changes in AWAC's GHG emissions. As a result, AWAC could
face additional costs associated with any new regulation of
GHG emissions, and AWAC's ability to modify our operations
to avoid these costs may be limited in the near term.
Additionally, AWAC have established strategies and expectations
relating to certain environmental, social, and governance
considerations, including regarding reducing GHG emissions,
reducing water usage, reducing waste, improving safety
performance, and managing social risks across our operations.
These strategies and expectations reflect our current plans and
aspirations, and there is no guarantee that they will be achieved.
AWAC's ability to achieve any such strategies or expectations
is subject to numerous factors and conditions, some of which
are outside of AWAC's control. Examples of such factors include,
but are not limited to, evolving legal, regulatory, and other
standards, processes, and assumptions, the pace of scientific and
technological developments, increased costs, the availability of
requisite suppliers, energy sources, or financing, and changes in
carbon markets. Failures or delays (whether actual or perceived) in
achieving our strategies or expectations related to climate change
and other environmental matters could adversely expose us to
potential liabilities, increased costs, reputational harm, and other
adverse effects on our business, operations, and reputation, and
increase the risk of litigation.
Market Risk exposure measures the changes in revenue mix
and sources as a result of climate risk. AWAC’s customers may
be exposed to industries that may be impacted by carbon prices.
Additional information in respect of climate change risks, can be
located in Alumina Limited 2022 Sustainability report, and Alumina
Limited’s Climate Change Position Statement. These documents can
be found at www.aluminalimited.com/sustainability.
30
Risk Title
Description
Response
Other risks
Closure/
impairment
of assets
Financial
management
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 carrying value of an asset
is impaired, such impairment may negatively impact Alumina
Limited’s profitability during the relevant period.
Closure, curtailment or sale of any one of AWAC’s operations
may result in a change in the timing or amount of required
remediation activities (and corresponding cash flow) and/or
an impairment being incurred as a result of the carrying value
of an asset exceeding its recoverable value. Additionally, the
conditions of rehabilitating closed assets may increase and the
cost of closure may also increase over time. Alumina Limited
does not have a contractual right in respect of the closure of
loss-making assets, only a veto right in some circumstances.
Alumina may be unable to access desired or required amounts
of capital (either debt – including renewal of existing facilities or
new financing, or equity at agreeable terms). Additionally, there
is a risk that Alumina Limited’s credit rating may change which
results in a moderate interest rate increase under existing
arrangements and which could increase the cost/availability
of future funding requirements.
Reliance on
AWAC
Alumina Limited relies on information being provided by
AWAC and Alcoa to inform its strategy and decision making
and prepare its public disclosures. There is a risk of such
information being delayed, incomplete or containing errors,
leading to potential challenges in managing Alumina’s business
and potential errors in Alumina’s public disclosures.
Closure of an asset may be
necessary to ensure the ongoing
competitiveness of AWAC operations.
Alumina Limited maintains capital
management policies, regularly
monitors commodity markets,
actively manages its balance sheet,
and also forecasts cash flow.
Alumina Limited has a US$500 million
syndicated bank facility with tranches
maturing:
· October 2025 (US$100 million)
· January 2026 (US$150 million)
· July 2026 (US$150 million)
· June 2027 (US$100 million)
As at 31 December 2023 there was
US$296.0 million drawn against the
syndicated facility.
Alcoa maintains financial controls
over the accounts of AWAC, which
are also audited. An information
protocol exists between Alcoa
and Alumina Limited.
Similarly, Alumina Limited maintains
controls over its financial reporting
process, which are also audited.
Alumina LimitedAnnual Report 2023 31
3. Review of AWAC operations
Alumina Limited is the 40% partner in the AWAC joint venture with a portfolio of assets in Australia, Brazil, Spain,
Saudi Arabia and Guinea, including globally leading bauxite mines and alumina refineries.
AWAC also has a 55% interest in the Portland aluminium smelter in Victoria, Australia.
ALUMINA AND THIRD PARTY BAUXITE
AWAC Operated Refineries
Shipments (million tonnes)
Production (million tonnes)
Average realised alumina price ($/tonne)
Cash cost per tonne of alumina produced
Margin¹ ($/tonne)
Platts FOB Australia – one month lag ($/tonne)
Ma’aden Joint Venture
AWAC’s share of alumina production
(million tonnes)
Third Party Bauxite Sales
Full-year ended
Change
Change
(%)
31 Dec
2023
31 Dec
2022
12.4
10.3
352
308
44
343
12.4
11.8
371
304
67
364
0
(1.5)
(19)
4
(23)
(21)
0
(12.7)
(5.1)
1.3
(34.3)
(5.8)
0.442
0.444
(0.002)
(0.5)
Shipments to third parties (million BDT)²
7.6
3.5
4.1
Total third-party revenue, inclusive
of freight³ ($ million)
464.3
164.9
299.4
117.1
181.6
1. Calculated as average realised price less cash cost of production. 2. Based on the terms of its bauxite supply contracts, AWAC’s bauxite
purchases from the Mineração Rio do Norte S.A. (“MRN”) mine in Brazil, and Compagnie des Bauxites de Guinée (CBG) mine in Guinea, differ
from their proportional equity in those mines. The sale of MRN was completed in 1H2022. 3. Includes freight revenue of $128.4 million for
2023 (2022: $36.7 million).
32
Whilst bauxite quality in WA is expected to remain
similar to recent lower grades until bauxite can be
accessed from new regions at Myara North and
Holyoake (no earlier than 2027), the WA Government’s
announcements provided increased confidence for
the AWAC business in WA.
The Kwinana refinery was partly curtailed with one of
the five digestors remaining offline since January 2023.
In January 2024, plans for refinery’s full curtailment
were announced.
During 2023 the San Ciprian refinery continued to
operate at around 50% of capacity, after production
was reduced in the second half of 2022. As announced
in December 2023, discussions commenced on the
future of San Ciprian refinery.
Production at the Alumar refinery was affected by
a ship to-shore conveyance system failure, alumina
ship loader maintenance as well as country wide
power outages.
Across the system there was increased planned
and unplanned maintenance activity, carried out in
line with the objective of improving system stability
and operational performance.
AWAC’s average realised price of $352 per tonne, was
$19 per tonne or 5% lower compared to the previous
year. The average alumina price in 2023 was 6% lower
compared to the previous year, however has recently
seen an increase in the spot price to around $370/t.
The average cash cost per tonne of Alumina increased
by 1% to $308 per tonne.
Cash cost per tonne of alumina produced^
$304
($16)
$14
$308
$3
$2
2022 Energy Caustic
Bauxite Con-
2023
version*
^ Includes the mining business unit at cost
* Conversion includes: employee costs, indirect costs
and other raw materials costs
Energy cost continued to move favourably, with
Spanish gas prices stabilising to an average of
€39 per MWh, down from €99 per MWh average
for 2022. However, the price remains elevated
from where it was in 2020 before the war in
Ukraine impacted European energy markets.
AWAC operated refineries
Production from AWAC operated refineries in
2023 was 10.3 million tonnes, 1.5 million tonnes
lower than 2022.
Alumina production: change by refinery (kt)
11,840
(777)
(157)
10,279
(626)
2022
Pinjarra
Wagerup
Kwinana
Alumar
San
Ciprian
2023
As a result of a prolonged annual mine plan approvals
process, production at the Pinjarra and Kwinana
refineries was impacted by mining lower bauxite
grades at the Huntly mine, starting from April 2023.
In December 2023, the Western Australia Government
approved AWAC’s latest five-year mine plan, known
as the 2023-2027 Mining and Management Program
(“MMP”), for its Huntly and Willowdale bauxite mines.
In addition, the WA Government granted an exemption
that allows AWAC to continue its mining operations
whilst the WA Environmental Protection Authority
undertakes a separate environmental impact
assessment of the MMP.
Alumina LimitedAnnual Report 2023 33
The San Ciprian refinery benefiting from lower prices
is the main driver for lower energy costs. Energy costs
were also lower in Brazil due to favourable oil prices.
This was offset by slightly higher energy costs in WA,
mostly as a result of higher usage due to the processing
of the lower bauxite grades.
European gas prices: MIBGAS (EUR/MWh)
The cash cost per bone dry tonne (BDT) of bauxite at
AWAC operated mines remained stable at $12.9 per
tonne. Bauxite cost per tonne of alumina in 2023 was
marginally higher compared with 2022. Bauxite usage
per tonne of alumina was higher as a result of the
lower bauxite grades in WA, partly offset by reduced
San Ciprian production where delivered bauxite costs
are higher.
300
250
200
150
100
50
0
Jan 20 Dec 20 Jan 21 Dec 21 Jan 22 Dec 22 Jan 23 Dec 23
2020 Gas
2021 Gas
2022 Gas
2023 Gas
Source: Bloomberg, January 2024
Cash cost per BDT of bauxite produced^
$12.9
$12.9
$0.7
($0.1)
($0.1)
($0.5)
2022
Labor
Fuel
Services &
maintenance
Other#
2023
# Other includes energy, supplies, PAE, royalties and other
^ AWAC operated mines
Caustic costs were slightly higher in 2023 up $3 per
tonne of alumina. Caustic soda inventory flow of up
to 6 months can delay the effect of market price
movements. Costs improved in the second half of 2023
as the benefit of lower market prices were realised
(with the benefit continuing into 2024), partly offset
by higher usage in WA due the lower bauxite grades.
Conversion costs which include employee costs,
indirect costs and other raw materials were higher
by $14 per tonne due to higher maintenance and
lower production.
The Australian dollar moved favourably year on
year, while the Brazilian Real and Euro movements
were unfavourable.
Caustic soda prices (US$/t)
Ma’aden Joint Venture
1,300
1,100
900
700
500
300
100
Jan 21
Dec 21
Jan 22
Dec 22
Jan 23
Dec 23
Northeast Asia
Southeast Asia
FOB Rotterdam
FOB US Golf
Source: S&P Global Commodity Insights, January 2024
Ma’aden refinery production attributable to AWAC
decreased by 0.5% in 2023 to 0.442 million tonnes
of alumina, operating at 98% of nameplate capacity.
The equity accounted loss was $47.5 million during
2023 (2022: $39.5 million equity loss). The result was
predominantly driven by a lower realised alumina price.
Third Party Bauxite Sales
AWAC’s shipments to third party customers increased
by 4.1 million BDT to 7.6 million BDT with the increase
mainly from additional sales from CBG.
Third party revenue increased by 182% due to
increased shipments and a higher average realised
bauxite price.
34
PORTLAND
Full-year ended
Change
Change
(%)
AWAC’S 55% Equity Share
Production (thousand tonnes)
EBITDA excluding significant items ($ million)
Realised price
31 Dec
2023
31 Dec
2022
156
(9.5)
159
64.6
2,369
2,884
LME aluminium cash – 15-day lag ($/tonne)
2,258
2,719
(3)
(1.9)
(74.1)
(114.7)
(515)
(461)
(17.9)
(17.0)
Portland’s 2023 aluminium production was marginally lower compared to 2022. Production rates increased
in the second half of 2022, running at about 95% of capacity following the restart of additional smelting pots.
In March 2023 production rates were reduced to approximately 75% of capacity, due to operational instability
and challenges related to production of rodded anodes.
EBITDA was lower in 2023 compared to 2022, primarily as a result of lower aluminium prices. This was partially
offset by a decrease in cash costs year on year supported by lower alumina prices.
In August 2023, Portland entered into a nine-year power supply agreement which will secure approximately
50% of the energy required to meet smelter nameplate capacity. The agreement will take effect from 1 July 2026.
4. AWAC Financial Review
AWAC recorded a net loss in the financial year ended 31 December 2023, reflecting lower average alumina and
aluminium prices and higher cash costs of production, impacted by processing of the lower quality of bauxite
grades in WA and higher maintenance cost in Brazil.
Income tax charge decreased in line with the lower taxable income generated by Australian and Brazilian
operations, partially offset by the valuation allowance on deferred tax assets in Brazil.
AWAC Profit and Loss (US GAAP)
US$ Million
Net profit/(loss) after tax
Add back: Income tax charge
Add back: Depreciation and amortisation
Add back: Net interest expense/(income)
EBITDA
Add back: Significant items (pre-tax)
EBITDA excluding significant items
Year ended
31 Dec 2023
Year ended
31 Dec 2022
(317.8)
170.2
317.5
(5.4)
164.5
45.0
209.5
301.1
239.8
295.3
(19.1)
817.1
(2.5)
814.6
Alumina LimitedAnnual Report 2023 35
AWAC’s net profit included the following significant items:
Significant Items (US GAAP)
US$ Million
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Change in the fair value of Portland Energy contracts
(13.0)
Reversal of derecognised VAT credits in Brazil
Loss on MRN Sale¹
Brazilian ARO refinery adjustment
Other²
Total significant items (pre-tax)
Total significant items (after-tax)³
–
–
–
(32.0)
(45.0)
(145.5)
39.0
60.3
(42.7)
(18.7)
(35.4)
2.5
(13.4)
1. AWAC’s interest in the MRN mine was sold to South32 during 1Q 2022. 2. Other significant items include charges related to restructuring,
severance and other payments. 3. The most significant item, for year ended 31 December 2023, relates to valuation allowance on Brazilian
deferred tax asset of $104m.
AWAC Balance Sheet (US GAAP)
US$ Million
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Cash and cash equivalents
Receivables
Inventories
Deferred income taxes
Property, plant & equipment
Other assets
Total Assets
Borrowings & capital lease obligations
Accounts payable
Taxes payable and deferred
Assets retirement obligations (non-current)
Other liabilities
Total Liabilities
Equity
353.7
496.2
735.3
–
3,172.7
1,685.5
6,443.4
79.1
794.6
181.7
578.7
891.4
2,525.5
3,917.9
236.1
435.0
868.9
96.0
2,852.7
1,695.9
6,184.6
79.6
793.8
321.0
470.8
798.6
2,463.8
3,720.8
36
The movement in the value of assets and liabilities includes the effect of the Australian dollar, Brazilian Real and
Euro against the US dollar throughout 2023.
Receivables increased due to the higher alumina realised prices in December 2023 relative to December 2022.
Inventory decreased mainly as a result of lower volume of raw materials purchases due to decreased production
levels and lower input prices, particularly for caustic soda.
Taxes payable and deferred decreased due to lower taxable income in Australia and the valuation allowance
on deferred tax assets in Brazil.
Estimates for assets retirement obligations (“ARO”) related primarily to mine reclamation and closure of bauxite
residue areas were increased with corresponding increase recorded in carrying amount of related long-lived
assets (Property, plant and equipment).
Other liabilities increased due to higher accrued employee compensation and retirement costs as well as
increase in current portion of AROs.
AWAC Cash Flow (US GAAP)
US$ Million
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Cash from operations
Capital contributions from partners
Net movement in borrowings
Capital expenditure
Other financing and investing activities1
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
1. Includes proceeds from sales of assets, and other.
(9.9)
471.1
(1.0)
(278.5)
2.9
8.1
192.7
(75.1)
117.6
481.5
535.4
3.6
(273.3)
9.8
(17.6)
739.4
(947.1)
(207.7)
Cash from operations in 2023 decreased mainly as a result of lower average realised alumina prices and
higher cash costs of production.
Capital contributions from partners decreased by $64.3 million to $471.1 million in order to support
working capital and capital expenditure requirements of AWAC entities.
Gross distributions paid to partners decreased to $75.1 million.
Sustaining capital expenditure for the year was approximately $243 million (2022: $246 million) with the
most significant expenditure relating to the construction of a residue storage area at Alumar and additional
tailing ponds at Juruti.
Growth capital expenditure was approximately $36 million (2022: $28 million) with the most significant
expenditure relating to refinery production debottlenecking at Alumar.
Alumina LimitedAnnual Report 2023 37
5. Alumina Limited Financial Review
Alumina Limited (“Alumina”) announced on 12 March 2024 that it has entered into a Scheme Implementation
Deed with Alcoa Corporation (“Alcoa”) in relation to a proposal for Alcoa to acquire 100% of the fully paid
ordinary shares in Alumina by way of a scheme of arrangement (“the Transaction”). Alumina Limited Annual Report
for the year ended 31 December 2023 contains an Independent Auditor’s report which highlights the existence
of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern
if the Transaction with Alcoa completes and a Review Event under Alumina’s syndicated revolving cash advance
facility agreement arises. Notwithstanding this, Alumina Limited Financial report for the year ended 31 December
2023 have been prepared on a going concern basis, which assumes the Group will be able to realise its assets
and discharge its liabilities in the normal course of business. For further information, refer to the section “About
this Report” in the Notes to the consolidated financial statements, together with the auditor’s report.
Alumina Limited Profit and Loss
US$ Million
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Revenue from continuing operations
Share of net profit/(loss) of associates accounted for
using the equity method
General and administrative expenses
Finance costs
Foreign exchange losses, tax and other
Profit/(loss) for the year after tax
Add back: Significant items (after tax)
Net profit/(loss) after tax excluding significant items
0.5
(119.4)
(11.6)
(19.8)
0.2
(150.1)
58.2
(91.9)
0.7
120.1
(12.5)
(4.4)
0.1
104.0
5.3
109.3
Significant Items (IFRS, POST-TAX)
US$ Million
Change in the fair value of Portland Energy contracts
Reversal of derecognised VAT credits in Brazil
Loss on MRN Sale
Brazilian ARO refinery adjustment
Valuation allowance on Brazil deferred tax asset
Other¹
Total significant items
Year ended
31 Dec 2023
Year ended
31 Dec 2022
(5.2)
–
–
–
(41.6)
(11.4)
(58.2)
15.6
15.9
(16.1)
(7.5)
-
(13.2)
(5.3)
1. Other significant items include charges related to restructuring and holding costs, severance and other payments.
38
Alumina Limited recorded a net loss after tax
of $150.1 million (2022: net profit after tax of
$104.0 million).
Excluding significant items, net loss after tax
would have been $91.9 million (2022: net profit
after tax of $109.3 million).
The decline in the Company’s net profit is due to
the decrease in the share of net profit of associates
reflecting AWAC performance during 2023 relative
to the previous year.
General and administrative expenses in 2023
decreased due to the weaker Australian dollar,
however, expenses expressed in AUD remained
consistent with the previous year.
The Company’s finance costs in 2023 were higher
than in the previous year, reflecting the higher
debt level.
Alumina Limited Balance Sheet
US$ Million
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Cash and cash equivalents
Investment in associates
Other assets
Total Assets
Payables
Interest bearing liabilities
Provisions and other liabilities
Total Liabilities
Net Assets
1.7
1,729.5
4.0
1,735.2
3.1
296.0
2.1
301.2
3.8
1,656.0
2.9
1,662.7
0.4
110.0
2.9
113.3
1,434.0
1,549.4
The increase in investments in associates was
principally due to the net capital contributions made
by Alumina Limited during the year and foreign
currency revaluations.
Alumina Limited has a US$500 million syndicated bank
facility with tranches maturing in October 2025
(US$100 million), January 2026 (US$150 million), July
2026 (US$150 million) and June 2027 (US$100 million).
Alumina Limited’s net debt as at 31 December 2023
was $294.3 million (2022: $106.2 million) and gearing
was 17% (2022: 6.4%).
As at 31 December 2023, there was US$296 million
drawn against the syndicated facility (2022: US$110
million).
Alumina LimitedAnnual Report 2023 39
Alumina Limited Cash Flow
US$ Million
Dividends received
Net finance costs paid
Payments to suppliers and employees
GST refund, interest received & other
Cash from operations
Receipts – capital returns from associates
Year ended
31 Dec 2023
Year ended
31 Dec 2022
30.0
(18.7)
(11.3)
0.7
0.7
–
360.6
(4.1)
(10.5)
1.0
347.0
18.0
Payments – investment in associates
(189.1)
(212.1)
Payment for shares acquired by the
Alumina Employee Share Plan
Effects of exchange rate changes on cash and
cash equivalents
Amount included in the final 2021 dividend
–
0.3
–
Free cash flow available for dividends
(188.1)
–
(0.1)
(33.8)
119.0
Net contributions to AWAC totalled $159.1 million
(2022: net receipts $166.5 million).
Additional capital contributions into AWAC were
required to support working capital and capital
expenditure needs of the AWAC entities. It is as a result
of lower alumina realised prices and increased costs
primarily due to the WA refineries operating with lower
grade bauxite.
Alumina Limited’s dividend policy is to distribute free
cash flow derived from net AWAC distributions less the
Company’s corporate and finance costs, whilst taking
into consideration its capital structure, any capital
requirements for AWAC and market conditions.
The Board had considered the above factors and
determined not to declare a final dividend in respect
of the year ended 31 December 2023.
40
6. Market, Outlook and Guidance
Alumina
Aluminium
Global primary aluminium consumption in 2023
grew by 1.1%, mainly supported by China’s 4.9%
growth in consumption. This was primarily driven by
strong demand from solar panels and electric vehicles
which more than offset weakness in China’s property
sector. Demand in the rest of the world (“RoW”)
dropped by 4.2% as it was impacted by high interest
rates and stubborn inflation. Looking ahead to 2024,
demand is expected to be supported by an improving
macroeconomy and a shift back towards the metal
intensive manufacturing sectors. The industrial
destocking process which depressed demand for
aluminium in 2023 is also expected to end in 2024.
In the medium to longer term, global demand for
aluminium is expected to be strong, underpinned
by structural strength in China’s green economy and
marked growth in renewable energy and electric
vehicles. Over the next decade, global primary
aluminium consumption is expected to grow by
14% or about 10 million tonnes.
Primary aluminium production in the world excluding
China was 29 million tonnes in 2023, representing an
1.6% increase from the previous year. Production in
RoW is expected to increase by about 2% over 2024.
LME aluminium prices peaked at around $2,600/t in
January 2023 as improved sentiment from China’s
post-covid reopening along with US dollar weakness
both contributed to the rally. However, poorer than
market anticipated demand quickly caused a
retracement in price and the fear of widespread
recession after central banks increased interest rates
resulted in prices trading sideways for most of 2023.
Low carbon aluminium premiums are developing and
as decarbonisation trends advance, these premiums
are expected to rise.
At the end of 2023, China’s primary aluminium capacity
was estimated to be 44.8 million tonnes per annum,
with a utilisation rate of 94%. New primary capacity
rollout is forecast to be limited as China approaches
the 45 million tonnes per annum cap.
RoW metallurgical alumina production decreased
by 1% in 2023, as supply disruptions in Australia,
Europe and Brazil more than offset expansions in
Indonesia and India. Non-metallurgical production of
alumina in RoW contracted by 20% driven primarily by
disruptions/curtailments in Europe and North America.
The RoW metallurgical alumina market was tightly
balanced in 2023, with a marginal deficit representing
around 0.1% of the global supply. The Alumina Price
Index spiked to a high of $371/t in February following
the news of supply disruptions in Australia. Prices
averaged $343/t for the year, a 5% decrease year
on year and tracking with historical average.
No new RoW greenfield metallurgical alumina projects
are expected in 2024. Brownfield expansions and
production ramp-ups are likely to be somewhat offset
by supply disruptions in Australia. With steady demand
growth from primary aluminium smelters, the RoW
metallurgical alumina market in 2024 is forecast to
be in further deficit compared to 2023.
In China, metallurgical alumina production grew by
5%, despite supply disruptions at inland refineries due
to environmental audits and domestic bauxite supply
concerns. This was driven by new projects and
expansions at coastal refineries.
China’s net alumina imports stood at 563 kt for 2023,
down 44% from the year before. China is expected
to produce alumina to only meet its internal demand
and export excess tonnes to Russia.
RoW refining costs averaged $288/t in 2023, down
8% compared with 2022. This was driven primarily
by easing of fuel and caustic costs. In China, average
production costs also fell by 8% in 2023 to reach
$320/t, driven by lower caustic soda and energy prices.
Chinese refineries process lower quality domestic
bauxite, and higher priced seaborne bauxite, which
offset some of the cost savings.
In China, alumina futures were introduced to the
Shanghai Futures Exchange in June 2023, adding
both liquidity and volatility to the Chinese market.
Alumina LimitedAnnual Report 2023 41
In the Atlantic regions, notable transactions included
Glencore’s acquisition of 30% equity stake of Alunorte
refinery and Century’s acquisition of 55% share of
Jamalco. Elsewhere, UC Rusal acquired 30% of Hebei
Wenfeng New Materials in China, amounted to 1.4 Mt
of alumina capacity per year.
bauxite reserves deplete further both in volume and
grades. Guinea is expected to be the main supplier
of bauxite to China, followed by Australia. Despite a
few bauxite beneficiation technologies being trialled
in China, they have proven to be uneconomic or
limited to only a small scale.
Bauxite
The first half of 2023 saw the ban of Indonesian
bauxite exports. Guinea more than compensated
for Indonesia’s ban as China imported 99 Mt of
Guinean bauxite in 2023, up 41% y/y. In 2023,
Guinea accounted for 70% of China’s bauxite imports,
compared with 56% in 2022. Total bauxite imports in
China for 2023 stood at 142 Mt, representing a 13%
increase y/y. This stems from both strict environmental
policies and depleting bauxite reserve in China that
necessitated the sourcing of seaborne bauxite.
The surge in demand for Guinean bauxite led to
an uptick in prices, with Guinea bauxite trading at
$70.5/t on a CIF China basis at the end of 2023. This
represents an increase of about $30/t since the start
of 2021. In the near to medium term, China’s demand
for imported bauxite is likely to grow as domestic
In 2023, bauxite cost was around $167 per tonne of
alumina in China, representing over 50% of refining
costs. In contrast, RoW bauxite cost was around $76/t
per tonne of alumina, or roughly 27% of refining costs.
AWAC Guidance
The following 2024 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 AWAC results. 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.
Refer to Forward Looking Statements on page 105
for further information.
Item
Production – alumina
Shipments – alumina
Production – aluminium
2024 Guidance
Approximately 9.4 million tonnes
Approximately 12.4-12.7 million tonnes
Approximately 161,000 tonnes
Third party bauxite shipments
Approximately 7.0 million BD tonnes
AWAC capital expenditure
AWAC Environmental, ARO & Other Restructuring
Related Items¹
Approximately $360 million
Approximately $160 million
1. Ongoing costs will be recognised in future financial years relating to the curtailments and closures.
Sensitivity
Alumina Price Index¹: +$10/t
Australian $²: + 1¢ AUD/USD
Brazilian R$: + 10¢ USD/BRL
2024 Guidance
Approximately +$90 million EBITDA
Approximately -$25 million EBITDA
Approximately +$6 million EBITDA
Caustic price³: +$10/dry metric tonne
Approximately -$8-9 million EBITDA
1. Excludes equity accounted income/losses for the Ma’aden joint venture. 2. Upon full curtailment of the Kwinana refinery, sensitivity will be
adjusted. 3. Caustic inventory flow is 5-6 months.
42
Remuneration
Report
THE REMUNERATION
REPORT IS PRESENTED IN
THE FOLLOWING SECTIONS:
1. Remuneration framework
43
44
45
45
1.1 Persons covered by this Report
1.2 Remuneration in business context
1.3 Remuneration governance framework
1.4 Remuneration strategy, components
and mix
2. Company performance and executive
remuneration outcomes
49
51
52
54
56
2.1 Company performance
2.2 Remuneration decisions and outcomes
for 2023
2.3 Actual “take home” 2023 remuneration
of continuing Executive KMP
2.4 Executive KMP performance under
the LTI plan
2.5 CEO and Key Executives statutory
remuneration
3. Non-Executive Directors remuneration
58
3.1 2023 Non-Executive Directors
Remuneration
59
3.2 Non-Executive Directors share holdings
4. Additional disclosures
60
62
63
64
65
65
65
65
4.1 Reconciliation of Conditional Rights
held by Executive KMP
4.2 Reconciliation of Performance Rights
held by Executive KMP
4.3 Reconciliation of ordinary shares held
by Executive KMP
4.4 Executive KMP service agreements
4.5 Cessation of employment
4.6 Change of control
4.7 Clawback policy
4.8 Share trading and hedge prohibition
Alumina LimitedAnnual Report 2023 43
1. Remuneration framework
1.1. Persons covered by this Report
This Report sets out remuneration information for Key Management Personnel
(“KMP”) which includes Non-Executive Directors (“NED”), the Executive Director
(the Chief Executive Officer (“CEO”)) and those key executives who have the
authority and responsibility for planning, directing and controlling the activities
of the group, either directly or indirectly (together with the Executive Director,
here in referred to as “Executive KMP”).
Name
Role
Non-Executive Directors
Peter Day
Non-Executive Chairman
Appointed Chairman 1 April 2018
Director since 1 January 2014
Chen Zeng
Non-Executive Director
Appointed 15 March 2013
Deborah O’Toole
Non-Executive Director
Appointed 1 December 2017
John Bevan
Non-Executive Director
Appointed 1 January 2018
Shirley In’t Veld
Non-Executive Director
Appointed 3 August 2020
Executive KMP
Mike Ferraro
Managing Director and CEO
Appointed 1 June 2017
Galina Kraeva
Chief Financial Officer (CFO)
Appointed 1 July 2022
Interim CFO from 1 January 2022 to 30 June 2022
Stephen Foster
General Counsel/Company
Secretary
Appointed 4 December 2002
Retired 1 July 2023
Changes since the end of the reporting period
Mr. Alistair Field was appointed as a non-executive director effective from 15 January 2024.
44
1.2. 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
multibillion-dollar global enterprise, AWAC, one of
the world’s largest bauxite and alumina producers.
AWAC is a large capital intensive business operating
in a number of jurisdictions with some in remote
locations. Alumina Limited’s executives are responsible
for protecting and advancing the interests of its
approximately 52,000 shareholders in the management
of AWAC. Consistent with the governing joint venture
agreements, Alumina executives are responsible
for providing strategic input and advice into the
joint venture.
This, in turn, draws on their abilities to persuade and
influence our joint venture partner. To do so, they must
have a clear position on the bauxite, alumina and
aluminium markets to allow detailed and substantive
discussion with our joint venture partner and our
shareholders on portfolio management, investment
opportunities, sustainability and disruptive threats.
At the Board’s direction, the CEO and key executives
are required to aim to maintain Alumina Limited’s
financial metrics consistent with an investment grade
rating, maximise cash flow from AWAC and support
the joint venture in its efforts to improve its relative
cost position and strategic options.
Alumina Limited’s goal is to be an active, informed
and engaged joint venture partner and therefore
it requires and must retain, high calibre people
with strong skills sets and commercial experience to
ensure the Company and its investment are managed
well. Hence, Alumina Limited’s remuneration needs
to be competitive, valued and relevant.
REMUNERATION
PRINCIPLES
/
Alignment
/
Relevance
Our remuneration is designed
to aid alignment of Company,
Executive, Board and
Stakeholders interests.
Appropriate mix of fixed and at-risk
components, short and long-term
elements reflecting a balance of financial
and non-financial objectives relevant to
target the non-operating nature of the
Company and specific executive roles.
Alumina LimitedAnnual Report 2023 45
1.3. 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:
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
· Take advice from management and where relevant,
remuneration related matters.
independent advisors.
· 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.
The Compensation Committee is solely formed of
Non-Executive Directors and is chaired by Ms In’t Veld.
Management
Provides the Compensation Committee with
information to assist in its remuneration decisions
including remuneration recommendations.
1.4. Remuneration strategy,
components and mix
Remuneration strategy
Alumina Limited’s remuneration strategy is based on
the following principles, which determine remuneration
components, their mix and way of delivery.
/
Sustainability
/
Transparency
Remuneration that is market
competitive, that attracts and
retains executives with capabilities
and expertise to deliver our strategy.
Remuneration outcomes that
are based on a set of clear
objectives and expectations
linked to Company strategy.
46
Executive KMP remuneration components and pay mix
The table below sets out the different components of remuneration for Alumina’s Executive KMP, the performance
measures used to determine the amount of remuneration executives will receive and how they are aligned with
Alumina Limited’s remuneration strategy.
Executive
remuneration
components
Strategic
intent
Performance
measure
Fixed remuneration
(“FAR”)
Deferred equity
remuneration
Long-term
incentive (“LTI”)1
Attract and retain executives
with the capability and
experience to deliver
our strategy.
Align performance focus
with the long-term business
strategy and shareholder
experience.
Align performance focus
with the long-term business
strategy and shareholders
experience.
FAR is set based on
market relativities,
reflecting responsibilities,
qualifications, experience
and effectiveness.
There is a three-year
trading restriction on the
shares from grant date.
The value of the equity
remains subject to
performance of the
Company’s share price.
LTI vesting is subject to
service and performance
tested three years from
the grant date.
The testing criteria is
three-year Company TSR
equal to or outperforming
the median of the two (one
local, one international)
comparator groups (50%
of the LTI is attributable to
each comparator group).
Delivery
Cash payment (part of the
CFO’s annual remuneration
is provided as a lump sum
at the end of the financial
year. The same applied to
Stephen Foster in 2023).
Conditional Rights
Performance Rights
1. More detail on the LTI remuneration components and the link to company performance is included in section 2 of this report.
Alumina LimitedAnnual Report 2023 47
CEO
The design of the CEO’s remuneration package reflects
the requirements of this critical leadership role to
create long term shareholder value, the responsibility
for the relationship with our joint venture partner and
influence on the strategic direction of joint venture
development and growth whilst advocating for the
interests of shareholders.
The CEO’s remuneration package includes a restricted
equity grant to better reflect the primarily influence-
based (rather than operational) nature of the role and
align with Alumina Limited’s remuneration strategy.
This design focuses on the value creation activities,
whilst eliminating potential prioritisation of short-term
goals over longer-term strategic objectives. It also
ensures that through increased exposure to an
equity-based component, the CEO’s remuneration
reflects shareholders’ experience and is not excessively
affected by swings in the commodity cycle.
The Board continues to set specific annual objectives
for the CEO, some will relate to the year ahead,
whereas others may take longer to achieve.
Progress is reviewed formally quarterly and at the
end of the year. This process provides the Board with
a basis to assess and discuss CEO performance in the
short term. Also, and importantly, it provides a basis
to ensure that the Board and CEO are aligned on
priorities that will underpin long-term shareholder
value creation and go to the heart of the role as
Alumina’s CEO.
It is Alumina’s philosophy to position the total CEO
reward opportunity in the lower quartile of market peers
(the ASX 51 – 100 and ASX 76 – 125 Rank comparator
groups). These are the same peer groups that have
been used to benchmark the CEO’s remuneration
for a number of years. The Board considers these peers
appropriate to set remuneration to attract and retain
a CEO of appropriate skills and experience through
the cycle.
The CEO’s 2023 remuneration package was
comprised of a FAR component of $1,488,400, an
equity component delivered via Conditional Rights
and Performance Rights equal to $489,300 and
$621,000 respectively at the time of the grant. The
actual remuneration awarded during the year is
comprised of the same components, however their
values will differ from the potential total remuneration,
specifically in relation to the value of the equity
components at the time of their vesting.
% of potential total remuneration
C
a
s
h
E
q
u
i
t
y
FAR 57%
Conditional Rights 19%
LTI Performance Rights 24%
Restriction period
Year 1
Year 2
Year 3
% of 2023 total actual remuneration
C
a
s
h
E
q
u
i
t
y
FAR 75%
Conditional Rights 25%
Restriction period
Year 1
Year 2
Year 3
48
The actual remuneration received by CEO in 2023
is comprised of a FAR component of $1,488,400,
a Conditional Rights grant of $489,300 and zero
Performance Rights at the time of testing and vesting
under the 2021 LTI plan.
The realised remuneration of the CEO remains strongly
aligned to the shareholder experience. There has
been no vesting of LTI grants in the past three years.
At the same time, the embedded value of the
CEO’s existing share interests and Conditional Rights
fluctuates in line with movements in Alumina Limited’s
share price. The impact on the value of Conditional
Rights granted to the CEO (and other KMPs) can be
seen in the table below.
The Company requires the CEO to build and maintain
a holding of Alumina Limited’s securities equal
to 100% of his fixed remuneration. Mr Ferraro has
not sold any shares acquired on vesting of rights
(Conditional or Performance) since his appointment
as CEO in 2017.
For the 2024 remuneration, the Board has considered
the market outlook, inflation rate and changes in
superannuation guarantee contribution rates and
resolved to award a 4% increase of the CEO’s total
reward opportunity by equally increasing each of the
remuneration components – FAR, Conditional Rights
and LTI. The CEO’s total remuneration remains in
the bottom quartile of the ASX 76-125 based on
benchmarking data.
VALUE CHANGE OVER TIME OF THE CONDITIONAL RIGHTS
Executive
KMP
Year
Number
of rights1,2,5
Value of rights
At the
grant
date1,2
(A$)
As at
vesting
date3
(A$)
As at
31 December
20234
(A$)
Decrease in
value as at
31 December
20234 (A$)
Decrease in
value as at
31 December
20234 (%)
Mike
Ferraro
Galina
Kraeva
Stephen
Foster5
2023
319,800
489,300
–
289,419
(199,881)
2022
248,843
472,800
425,522
378,241
(94,558)
Total
568,643
962,100
425,522
667,660
(294,439)
2023
58,800
90,000
–
53,214
(36,786)
2022
Total
39,474
75,000
67,501
60,000
(14,999)
98,274
165,000
67,501
113,214
(51,785)
2023
47,700
72,981
66,065
Total
47,700
72,981
66,065
–
–
–
–
(41)
(20)
(31)
(41)
(20)
(31)
–
–
1. The number of CEO’s Conditional Rights is determined by dividing the set value of $489,300 (2022: $472,800) by a VWAP of $1.53 (2022:
$1.90). 2. The number of CFO’s Conditional Rights is determined by dividing the set value of $90,000 (2022: $75,000) by VWAP of $1.53
(2022: $1.90). 3. The value of Conditional Rights vested is determined by the number of vested Rights multiplied by the market price at the
vesting date. 4. The value of Conditional Rights as at 31 December 2023 is determined by the number of vested Rights multiplied by the
market price at that date. 5. Mr Foster retired on 1 July 2023. The number of Conditional Rights granted was determined by dividing the set
value of $146,000 by VWAP of $1.53 and pro-rated for the period of service. The value vested is determined using the share price of $1.38
on 30 June 2023. Given that Mr Foster ceased to be a KMP during the year, his vested Conditional Rights as at 31 December 2023 are not
disclosed. Refer section 4.5 for details on the cessation of employment.
Alumina LimitedAnnual Report 2023 2. Company performance and
executive remuneration outcomes
2.1. Company performance
Alumina Limited recorded a net loss after tax of
$150.1 million dollars. The Company did not declare
dividends for the year ended 31 December 2023.
In 2023, AWAC experienced delays with approvals for
bauxite mining in Western Australia, which negatively
affected production from the Australian refineries and
the overall alumina production costs at the combined
AWAC Level. The Kwinana refinery was partly curtailed
from January 2023 and in January 2024 plans for
the full curtailment of the refinery were announced,
beginning in the second quarter of 2024.
Production from other AWAC operated refineries
decreased too. The San Ciprian refinery continued
to operate at around 50% of its capacity and the
Alumar refinery was affected by the maintenance
events related to the ship-to-shore conveyance system
failure and alumina ship loader. As announced in
December 2023, engagement with the stakeholders
in Spain was initiated in relation to the future of the
San Ciprian operations. Overall, across the business
production of alumina decreased by 12.5% in 2023.
The realised alumina price in 2023 was $352 per
tonne, 5.1% down compared to the prior year.
At the same time, AWAC’s production costs increased
to $308 per tonne due to lower bauxite grades used
by the Pinjarra and Kwinana refineries as well as costs
associated with the unplanned maintenance events in
Brazil. As a consequence, AWAC’s margin decreased,
year on year to $44 per tonne. For the year ended
31 December 2023, AWAC recorded a net loss after
tax of $317.8 million and its EBITDA has decreased
to $164.5 million.
49
In the context of the regulatory and operating
challenges faced by the AWAC during the last year,
Alumina Limited’s share price declined in the second
half of 2023. However, the AWC share price has
remained highly correlated to the price of alumina
through the commodity cycle:
Five years Platts Alumina Price (US$/t)
$730
$680
$630
$580
$530
$480
$430
$380
$330
$280
$230
$180
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$3.00
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For more information on the Company’s business
model and 2023 results, see pages 18 to 41 of the
operating and financial review.
Subsequent to year end, Alumina Limited and Alcoa
Corporation have entered into a Scheme Implementation
Deed in relation to a proposal for Alcoa to acquire 100%
of the fully paid ordinary shares of Alumina Limited.
For more information about the potential transaction,
see page 93 of the Financial Report.
50
Historical company performance
The table below shows the Company’s financial performance over the last five years as required by the
Corporations Act 2001.
2023
2022
2021
2020
2019
Net (Loss)/Profit after tax (US$ million)
(150.1)
104.0
187.6
146.6
214.0
Net (Loss)/Profit after tax
(excluding significant items) (US$ million)
(91.9)
109.3
226.0
146.5
326.6
Dividend declared (US cents per share)
–
4.2
6.2
5.7
Share price at the end of the period
(AUD per share)
0.905
1.520
1.865
1.835
8.0
2.30
Total shareholder return –
including franking credits (%)
Total shareholder return –
excluding franking credits (%)
(40.5)
(11.3)
9.0
(14.2)
15.5
(40.5)
(13.5)
6.8
(16.0)
10.8
vAlumina LimitedAnnual Report 2023 51
2.2 Remuneration decisions and outcomes for 2023
2023 outcomes
Fixed
remuneration
Deferred equity
remuneration1
Long-term
incentive
With consideration to the market outlook, inflation factors and changes in the
superannuation guarantee contribution rates, the CEO’s total reward in 2023 was
increased by 3.5% by equally increasing each of the remuneration components,
being FAR, Conditional Rights and LTI.
In 2023, fixed remuneration for Ms Kraeva and Mr Foster increased by 4.2% and
3.5% respectively.
From 2024, fixed remuneration for the CEO increased by 4%, in line with the increases
applied to the broader staff of the Company. CFO fixed remuneration increased by
10.5% to $690,600 to address the market competitiveness of her fixed remuneration.
The annual deferred equity grant was made to key executives. In the case of
the Company Secretary, his outcome was pro-rated for the part of the year he
was employed.
The FY21 LTI was tested in 2023 (testing period December 2020 to December 2023)
and Alumina Limited’s performance against the ASX and International Comparator
Groups fell below the minimum required vesting threshold of 50th percentile ranking
and therefore zero per cent of the potential entitlement vested.
This outcome reflects the shareholder experience during the testing period and
illustrates the LTI functioning as intended.
1. The Board evaluates performance of the CEO and CFO against a range of individual and non-financial objectives. Performance as having
met expectations has been taken into account in setting up the level of remuneration for 2024.
v 52
2.3 Actual “take home” 2023 remuneration
of continuing1 Executive KMP
The information below includes the actual ‘take home’
remuneration for continuing executives and does
not include each Executive KMP from the statutory
remuneration table (See section 2.5 on page 56).
· Conditional Rights vested (being the number
of Conditional Rights that vested multiplied
by the market price at the vesting date); and
· LTI vested and exercised (being the number of
Performance Rights that vested and exercised
multiplied by the market price at the exercise date).
The actual remuneration awarded during the year
comprises the following elements:
· Cash salary including superannuation benefits,
leave entitlements and any salary sacrifice
arrangements and other agreed annual cash
payments, but excluding termination payments;
· Other short-term benefits comprised of the personal
financial advice allowance and travel allowance;
These values differ from the executive statutory
remuneration table and have not been prepared in
accordance with statutory requirements and Australian
Accounting Standards. The directors believe that the
‘take home’ remuneration is more relevant to users
as the statutory remuneration shows benefits before
they are received by executives, even though certain
benefits, such as LTI awards, may fail to vest.
Year
Short-term benefits (A$)
Share based payments (A$)
FAR including
superannuation
Other
Total
Conditional
Rights
Performance
Rights
Total
Executive KMP
Mike Ferraro
2023
1,488,400
11,986 1,500,386
425,522
2022
1,438,100
13,763
1,451,863
526,762
Galina Kraeva
2023
720,000
657,500
–
–
720,000
67,501
657,500
–
2,208,400
11,986 2,220,386
493,023
2,095,600
13,763
2,109,363
526,762
Total
2022
2023
2022
1. Mr Foster retired on 1 July 2023.
–
–
–
–
–
–
425,522
526,762
67,501
–
493,023
526,762
Total
“take home”
remuneration
(A$)
Total
statutory
remuneration
(A$)
1,925,908
2,298,953
1,978,625
2,156,273
787,501
657,500
958,156
933,958
2,713,409
3,257,109
2,636,125
3,090,231
Alumina LimitedAnnual Report 2023 53
Year
Short-term benefits (A$)
Share based payments (A$)
FAR including
superannuation
Other
Total
Conditional
Performance
Total
Rights
Rights
Executive KMP
Mike Ferraro
2023
1,488,400
11,986 1,500,386
425,522
2022
1,438,100
13,763
1,451,863
526,762
Galina Kraeva
2023
720,000
720,000
67,501
657,500
657,500
–
–
–
Total
2,208,400
11,986 2,220,386
493,023
2,095,600
13,763
2,109,363
526,762
2022
2023
2022
–
–
–
–
–
–
425,522
526,762
67,501
–
493,023
526,762
1. Mr Foster retired on 1 July 2023.
Total
“take home”
remuneration
(A$)
Total
statutory
remuneration
(A$)
1,925,908
2,298,953
1,978,625
2,156,273
787,501
657,500
958,156
933,958
2,713,409
3,257,109
2,636,125
3,090,231
54
2.4 Executive KMP performance under the LTI plan
2023
Key features of the LTI Plan
Description
The LTI is delivered in the form of Performance Rights that are tested over a three-year
performance period. Each Performance Right that vests delivers to the holder an ordinary
share in Alumina Limited upon exercise of the Right.
Performance
period
Performance
hurdles
Three years
Alumina Limited’s performance is tested using relative TSR compared against two
comparator groups. Relative TSR was chosen as an appropriate means of measuring
Company performance as it incorporates both capital growth and dividends.
The two comparator groups against which Alumina Limited’s performance were tested are:
· ASX Comparator Group (Test 1 – 50% weighting): Australian listed entities in S&P/ASX 100
Index, excluding property trusts, the top 20 companies by market capitalisation and
Alumina Limited.
· International Comparator Group (Test 2 – 50% weighting): reflecting the Company’s direct
competitors in the market comprising nine selected companies in the alumina and/or
aluminium industries that are listed in Australia or overseas, excluding the Company. The
following companies were included in the group: Alcoa Corporation, Aluminium Corporation
of China, Century Aluminium Company, Hidalco Industries, Norsk Hydro ASA, Shandong
Nanshan Aluminium Co., South32, United Company Rusal (HKG) and Yunnan Aluminium Co.
Performance
assessment
Performance hurdles are independently measured by Deloitte Financial Advisory 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.
Entitlements
Alumina Limited’s TSR
percentile rank
Below 50th
Equal to 50th
Between 50th and 75th
(ASX Comparator Group)1
Percentage of vesting in (applies individually
to each comparator group)
0%
50%
An additional 2% of award for each
percentile increase
Equal to or greater than 75th
100%
Following testing, any Performance Rights that have not vested will lapse.
The participant is only entitled to proportionally receive dividends and other distributions,
bonus issues or other benefits if the performance conditions applicable to Performance
Rights are satisfied (or waived) and the Performance Rights vest and are exercised.
Shares relating to Performance Rights, 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.
In 2023 the Board exercised its discretion to determine, that upon key management personnel
(KMP), including Mr Ferraro, ceasing employment with the Company as a result of genuine
retirement (and being considered a good leaver under the ESP rules), the ESP rule providing for
pro rata lapsing should not apply to all of the relevant KMP member’s unvested Performance
Rights that existed as at 31 December 2023. The Board exercised its discretion to encourage
retention of KMP and having regard to the Company’s best interests. This exercise of discretion
does not apply to future Performance Rights that are issued such as those offered in January
2024. However, the Board could in the future determine to exercise that discretion for the
Performance Rights offered in January 2024.
Alumina LimitedAnnual Report 2023 55
2023
Key features of the LTI Plan (continued)
Opportunity
levels2,3
Percentage of FAR (%)
CEO
Approx 42
CFO
Approx 25
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 by the Board to those entities (or securities).
2. To determine the number of Performance Rights to be offered, the LTI opportunity is allocated using a face value allocation methodology
being the annual dollar value of the LTI grant 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 under the LTI plan for the relevant year. 3. The former Company Secretary/General
Counsel had an LTI opportunity equal to 40% of his fixed annual remuneration. He retired on 1 July 2023.
Alumina Limited’s performance resulted in zero per cent of the total potential entitlement in relation to the FY21
LTI vesting in December 2023. The table below summarises Alumina Limited’s TSR performance against each of
the comparator groups. Full reconciliation of number of rights at the beginning and the end of the financial year
provided in section 4.2 of this report.
LTI – FY21 (tested in 2023)
Description
Currency
ASX comparator group
International comparator group
AUD
USD1
Performance period
14 December 2020 to 13 December 2023
Alumina Limited’s TSR
(53.9%)
Alumina Limited’s TSR percentile rank
4.9%
Comparator group median TSR
11.5%
0.0%
41.1%
Comparator group TSR range
(32.1%) to 118.7%
(28.6%) to 123.3%
1. TSR for the International comparator group is calculated using prices and dividends converted to US dollars on a daily basis.
LTI – performance rights vesting in future years
Performance rights yet to vest from prior years were offered to the CEO and key executives in 2022 and 2023
and have the following grant date fair values:
Tranche No
FY22
FY23
CEO1
$0.86
$0.74
Executive KMP2
$1.10
$0.88
1. CEO’s performance rights grant is subject to shareholder approval. Therefore, the grant date is deemed to be the date of AGM.
2. Performance Rights to key executives were granted on 3 February 2022 and 19 January 2023.
56
2.5 CEO and Key Executives statutory remuneration
The following table shows details of the remuneration expense recognised for the Group’s Executive KMP for the
current and previous financial years measured in accordance with the requirements of the Australian Accounting
Standards. Amounts shown under share-based payments reflect the accounting expense recorded during the
year with respect to awards that have or are yet to vest.
Year
Short-term benefits (A$)
Long-term
Post employment
benefits (A$)
benefits (A$)
Share based payments (A$)
remuneration
Total
(A$)
FAR1
STI
Non-monetary2
Annual
leave3
Other4
Long-service
Superannuation and
leave
termination5
Conditional
Rights6
Performance
Rights7,8
Executive KMP
Mike Ferraro
Galina Kraeva
Stephen Foster9
Andrew Wood10
Total Executive
Remuneration
2023
2022
2023
2022
2023
2022
2022
2023
2022
1,462,054
1,416,882
–
–
–
–
1,369
11,986
(21,945)
13,763
598,654
95,000
8,729
35,914
550,570
82,500
8,404
63,173
296,400
66,365
4,364
(26,566)
567,854
266,000
8,404
(22,333)
313,768
–
–
2,154
–
–
–
–
–
2,357,108
161,365
13,093
10,717
11,986
2,849,074
348,500
16,808
21,049
13,763
1. FAR is the total cash cost of salary and short-term compensated absences, exclusive of superannuation. 2. Non-monetary benefits represent
the value of the car park. 3. The amounts disclosed in this column represent the movement in the annual leave provision year on year. 4. Other
short-term benefits include travel allowance. 5. Superannuation and termination reflect the compulsory SGC contributions for all Executive
KMP and termination payment for Mr Wood in 2022. 6. The CEO’s remuneration package and STI for key executives include a Conditional
Rights component. In accordance with AASB 2, the value attributed to the Conditional Rights represents the amortisation for the reporting
period of the value at grant date of all previously granted Conditional Rights that have neither vested nor lapsed.
44,110
43,682
21,971
58,776
14,391
(20,111)
13,924
80,472
96,271
26,346
21,218
26,346
24,430
19,496
25,146
725,096
72,188
795,890
489,300
472,800
90,000
75,000
72,981
–
–
652,281
547,800
263,788
2,298,953
209,873
2,156,273
81,542
71,105
958,156
933,958
161,270
608,701
125,345
950,305
56,216
1,111,158
506,600
3,865,810
462,539
5,151,694
Alumina LimitedAnnual Report 2023 57
Year
Short-term benefits (A$)
Long-term
benefits (A$)
Post employment
benefits (A$)
Share based payments (A$)
Total
remuneration
(A$)
FAR1
STI
Non-monetary2
Other4
Annual
leave3
Long-service
leave
Superannuation and
termination5
Conditional
Rights6
Performance
Rights7,8
Executive KMP
Mike Ferraro
1,462,054
1,416,882
–
–
1,369
11,986
(21,945)
13,763
Galina Kraeva
598,654
95,000
8,729
35,914
550,570
82,500
8,404
63,173
Stephen Foster9
296,400
66,365
4,364
(26,566)
Andrew Wood10
313,768
–
2,154
567,854
266,000
8,404
(22,333)
–
–
–
–
–
Total Executive
Remuneration
2,357,108
161,365
13,093
10,717
11,986
2,849,074
348,500
16,808
21,049
13,763
2023
2022
2023
2022
2023
2022
2022
2023
2022
–
–
–
44,110
43,682
21,971
58,776
14,391
(20,111)
13,924
80,472
96,271
26,346
21,218
26,346
24,430
19,496
25,146
725,096
72,188
795,890
489,300
472,800
90,000
75,000
72,981
–
–
652,281
547,800
263,788
2,298,953
209,873
2,156,273
81,542
71,105
958,156
933,958
161,270
608,701
125,345
950,305
56,216
1,111,158
506,600
3,865,810
462,539
5,151,694
7. 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. 8. The award of performance rights to the CEO is approved by shareholders at the AGM on 29 May 2023. 9. Mr Foster
retired, effective from 1 July 2023. Refer section 4.5 for details on the retirement payment. 10. Mr Wood’s employment with Alumina Limited
ceased on 30 September 2022.
58
Alumina Limited
3. Non-Executive Directors remuneration
3.1 2023 Non-Executive Directors
remuneration
The maximum remuneration for Non-Executive
Directors is determined by resolution of shareholders.
At the 2023 AGM, shareholders approved a maximum
aggregate remuneration of $1,700,000 per annum
for Non-Executive Directors. A total of $1,171,026
(inclusive of superannuation) was paid in Non-
Executive Director fees in 2023.
Other than the Chairman, who receives a single
base fee of $410,000 (inclusive superannuation),
Non-Executive Directors receive a base fee plus
additional fees for membership of Board Committees
and superannuation contribution (the exception being
Mr Chen Zeng, who has elected to forgo all Board fees
effective from 1 July 2023). Non-Executive Directors
do not participate in incentive plans or receive any
retirement benefits other than statutory
superannuation contributions.
The remuneration packages for Non-Executive
Directors are set out below. Superannuation
contributions made by the Company on behalf
of Non-Executive Directors are included in the
fees amounts presented in the table on the right.
There will be no increase in the Non-Executive
Directors fee pool, base fee, member fee or committee
chair fee (other than the Sustainability Committee
Chair fee) in 2024. The Sustainability Committee
Chair fee in 2024 will be $38,325. From 1 July 2024,
the SGC rate will rise to 11.5%, director fees will not
be changed as a result of the rate increase.
All Non-Executive Directors enter into a service
agreement with the company in the form of a letter
of appointment. The letter summarises the board
policies and terms, including remuneration, relevant
to the office of director. The table below provides
summary of the actual remuneration received by
each Non-Executive Director and is prepared in
accordance with statutory requirements and
relevant accounting standards.
Base fee
Compensation Committee – Chair
Compensation Committee – Member
Audit and Risk Management Committee – Chair
Audit and Risk Management Committee – Member
Sustainability Committee – Chair
Sustainability Committee – Member
Nomination Committee – Chair
Nomination Committee – Member
20231
A$
164,250
38,325
10,950
38,325
10,950
–
10,950
16,425
–
1. From 1 July 2023, the SGC rate increased from 10.5% to 11%. Director fees (inclusive of superannuation) have not
changed as a result of the rate change.
Non-Executive
Director
Peter Day
Deborah O’Toole
Year
2023
2022
2023
2022
Fees
(A$)
Superannuation
(A$)
Total
remuneration (A$)
383,654
385,570
202,687
203,606
26,346
24,430
21,788
20,869
410,000
410,000
224,475
224,475
Annual Report 2023 59
Non-Executive
Director
Chen Zeng1
John Bevan
Shirley In’t Veld
Total Non-Executive
Director remuneration
Year
2023
2022
2023
2022
2023
2022
2023
2022
Fees
(A$)
Superannuation
(A$)
Total
remuneration (A$)
89,186
178,776
192,800
193,674
202,687
203,606
1,071,014
1,165,232
9,365
18,324
20,725
19,851
21,788
20,869
100,012
104,343
98,550
197,100
213,525
213,525
224,475
224,475
1,171,026
1,269,575
1. Mr Zeng elected to forgo Board and Board Committee fees effective from 1 July 2023.
3.2 Non-Executive Directors share holdings
Each Non-Executive Director is required to hold shares in the Company having a value at least equal to 50 per
cent of their annual fees (based on the date of purchase of shares) within five years from their appointment as a
Director. Provided the minimum shareholding requirement is satisfied when shares are acquired or by the expiry
of the five year term, should a decline in the Company’s share price mean the value of the shareholding does not
equal 50% of the amount of base annual fees, directors are not required to acquire shares to increase their level
of shareholding to equal the amount of 50% of the base annual fees.
Subject to the Company’s Securities Dealing Policy, it is the Director’s decision at what time the required
shareholding is acquired.
Non-Executive
Director
Peter Day
Deborah O’Toole
Chen Zeng1
John Bevan
Shirley In’t Veld
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Number of
shares as at
1 January1
Number of
shares acquired
during the year
Number of
shares as at
31 December1
Date on
which policy
compliance
148,770
148,770
70,000
70,000
4,804
4,804
300,054
300,154
152,563
102,563
–
–
–
–
–
–
–
–
–
148,770
03/11/2014
148,770
70,000
20/12/2021
70,000
4,804
4,804
n/a-2
300,154
01/01/2018
300,154
152,563
03/08/2020
50,000³
152,563
1. Number 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. Mr Zeng is a nominee of CITIC and CITIC holds 548,959,208 ordinary fully paid shares in
Alumina Limited. 3. 50,000 purchase on 30 June 2022.
60
4. Additional disclosures
4.1 Reconciliation of Conditional Rights held by Executive KMP
Year
Number of ordinary shares
Value of rights (A$)
Total
as at
1 January
Granted
during the
year1,2,3,8
Vested
during the
year4,8
Lapsed
during the
year5
Total
as at
31 December6
Granted
Vested
Lapsed
during the
during the
during the
year1,2,3,9
year7,9
year5,9
Maximum
value of
rights yet
to vest
(A$)8
Executive KMP
Mike
Ferraro
Galina
Kraeva
Stephen
Foster
2023
2022
2023
2022
2023
248,843
319,800
(248,843)
256,957
248,843
(256,957)
39,474
58,800
(39,474)
–
–
39,474
–
95,400
(47,700)
(47,700)
–
–
–
–
319,800
248,843
58,800
39,474
–
489,300
(425,522)
472,800
(526,762)
90,000
67,500
–
–
–
–
146,000
(65,826)
(65,826)
–
–
–
1. Mr Ferraro receives Conditional Rights as an element of remuneration. 2023 includes Conditional Rights granted on 12 January 2023
(2022: 3 February 2022). The number of Conditional Rights is determined by dividing the set value of $489,300 (2022: $472,800) by a Volume
Weighted Average Price (VWAP) of $1.53 (2022: $1.90). 2. Ms Kraeva receives Conditional Rights as an element of remuneration. Conditional
Rights were granted on 12 January 2023 (2022: 3 February 2022). The number of Conditional Rights is determined by dividing the set value
of $90,000 (2022: $75,000) by a VWAP of $1.53 (2022: $1.90). 3. Conditional Rights to Mr Foster were granted on 12 January 2023.The
number of Conditional Rights was determined by dividing the set value of $146,000 by a VWAP of $1.53. 4. On vesting, each Conditional
Right automatically converts into an ordinary share in Alumina Limited. The terms of Conditional Rights granted were not altered during
2023. The number of Conditional Rights vested is the number granted in the prior years, following the completion of the required service
period. There is a three-year trading restriction on the shares from grant date as long as Executive KMP remain employed by the Company.
5. Mr Foster retired on 1 July 2023 and received a pro-rata allocation of Conditional Rights for the period of employment. The remaining
rights have lapsed. 6. Number of Conditional Rights yet to meet the required condition and have not lapsed. 7. Value vested is equal to the
number of Conditional Rights that have satisfied the required conditions multiplied by the share price at the time of vesting. In 2023, for
Mr Ferraro, it was 248,843 Conditional Rights by the share price of $1.71 on 3 February 2023 (2022: 256,957 Conditional Rights by the share
price of $2.05 on 14 January 2022). For Ms Kraeva, it was 39,474 Conditional Rights by the share price of $1.71 on 3 February 2022. For
Mr Foster, the value vested is determined using the share price of $1.38 on 1 July 2023. 8. The maximum value of the Conditional Rights is
based on the number of rights that vest and are released at the expiration of the conditional period, multiplied by the share price on the
date of release. 9. The value of the equity remains subject to performance of the Company’s share price.
Alumina LimitedAnnual Report 2023 61
4. Additional disclosures
4.1 Reconciliation of Conditional Rights held by Executive KMP
Year
Number of ordinary shares
Value of rights (A$)
Total
as at
1 January
Granted
during the
year1,2,3,8
Vested
during the
year4,8
Lapsed
during the
Total
as at
year5
31 December6
Granted
during the
year1,2,3,9
Vested
during the
year7,9
Lapsed
during the
year5,9
Executive KMP
Mike
Ferraro
Galina
Kraeva
Stephen
Foster
2023
2022
2023
2022
2023
248,843
319,800
(248,843)
256,957
248,843
(256,957)
39,474
58,800
(39,474)
39,474
–
–
–
–
–
–
–
319,800
248,843
58,800
39,474
–
95,400
(47,700)
(47,700)
146,000
(65,826)
(65,826)
489,300
(425,522)
472,800
(526,762)
90,000
67,500
–
–
–
–
Maximum
value of
rights yet
to vest
(A$)8
–
–
–
62
4.2 Reconciliation of Performance Rights held by Executive KMP
Year1
Number of Performance Rights
Total
as at
1 Jan2
Granted
during the
year3
Exercised
during the
year4,5
Lapsed
during the
year6
Total
as at
31 Dec7
Yet to be
exercised
as at
31 Dec
Yet to
vest as at
31 Dec
Executive KMP
Mike
Ferraro
Galina
Kraeva
Stephen
Foster8
Andrew
Wood9
2023
617,900
400,600
2022
516,300
326,100
2023
149,800
101,600
2022
118,600
81,500
2023
255,600
158,400
2022
224,200
128,900
2022
125,500
72,100
–
–
–
–
–
–
–
(291,800)
726,700
(224,500)
617,900
(68,300)
183,100
(50,300)
149,800
(255,328)
–
(97,500)
255,600
(135,754)
61,846
–
–
–
–
–
–
–
726,700
617,900
183,100
149,800
–
255,600
61,846
1. 2023 include Performance Rights granted on 19 January 2023 (2022: 3 February 2022) for the three-year performance test period concluding
7 December 2025 (2022: 9 December 2024). The award of performance rights to the CEO was approved by shareholders at the AGM on
29 May 2023 (2022: 25 May 2022). 2. Includes the number of Performance Rights granted that were subject to testing in 2023. 3. The terms of
Performance Rights granted were not altered during 2023. Number of Performance Rights granted calculated as the annual dollar value of the
LTI grant divided by the average Company share price over the 20 trading days leading up to the time that the Board determined to make offers
under the LTI plan for the relevant year. 4. 2023 include the number of Performance Rights that, due to testing of the relevant period, were vested
and exercised in 2023. It also includes Performance Rights vested in previous years that were exercised in 2023. 5. Performance Rights vest on
satisfaction of the performance criteria. 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 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 be exercised, then they will be deemed to be exercised by the
eligible participant. 6. The number of the Performance Rights that did not meet the criteria for vesting and therefore lapsed. As disclosed in
section 2.4, zero per cent of Performance Rights vested in 2023 due to testing of Tranche 21. 7. Includes number of Performance Rights granted
subject to future testing (yet to vest) and number of Performance Rights vested but yet to be exercised. 8. Mr Foster’s unvested Performance
Rights lapsed proportional to the amount of the testing period that had not yet elapsed at the time of retirement. More detail on his unvested
Performance Rights is included in section 4.5 of this Report. Since Mr Foster is no longer employed by the Company, the number of his
performance rights at year end is not disclosed. 9. Mr Wood ceased to be a KMP on 30 September 2022.
Alumina LimitedAnnual Report 2023 63
Year1
Value of Performance Rights (A$)
Granted
during the
year1
Exercised
during the
year2
Lapsed
during the
year1
Yet to be
exercised1
Minimum
value of
grants yet
to vest3
Maximum
value of
grant yet
to vest1
Executive KMP
Mike
Ferraro
Galina
Kraeva
Stephen
Foster
Andrew
Wood
2023
2022
2023
2022
2023
2022
2022
296,444
280,446
89,408
89,650
139,392
141,790
79,310
–
–
–
–
–
–
–
(215,932)
(134,700)
(65,568)
(58,097)
(121,632)
(112,613)
(148,353)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
576,890
494,919
179,058
155,218
167,989
263,422
62,084
1. Calculated by multiplying the number of Performance Rights granted by the fair value as at the date of the grant, independently calculated
by Deloitte Financial Advisory (2022: 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. 2. The value of Performance Rights exercised is determined by the number of Rights multiplied by the market price
at the exercise date. 3. The minimum value of the Performance Rights for any given year is zero.
4.3 Reconciliation of ordinary shares held by Executive KMP
Year1
Value of Performance Rights (A$)
Total
as at
1 Jan1
Acquired
during the
year under
LTI2
Acquired during
the year under
Conditional
Rights
Other shares
acquired
during
the year
Sold
during
the year
Total
as at
31 Dec
Executive KMP
Mike
Ferraro
Galina
Kraeva
Stephen
Foster3
Andrew
Wood
2023
1,225,584
2022
2023
2022
968,627
126,357
126,357
2023
1,130,199
2022
2022
1,130,199
382,283
–
–
–
–
–
–
–
248,843
256,957
39,474
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,474,427
1,225,584
165,831
126,357
–
1,130,199
–
1. Number 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. For Ms Kraeva, the prior year opening balance reflects the number of shares held when she commenced
as ICFO/CFO. 2. December 2023 testing of 2021 Performance Rights resulted in zero per cent vesting of total potential entitlement. In 2022,
2020 Performance Rights that were tested in December 2022 resulted in zero percent vesting. 3. Mr Foster retired during the year and
therefore his shareholding as at 31 December 2023 was not disclosed.
64
4.4 Executive KMP service agreements
Remuneration and other terms of employment for executives are formalised in service agreements.
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).
Term of agreement
and notice period
Mike Ferraro
Termination payments1
· No fixed term.
· Alumina Limited may, at its discretion, make a payment in lieu of
· 12 month written notice from
either party.
· Mr Ferraro’s employment may
be terminated immediately for
any conduct that would justify
summary dismissal.
some or all of the notice period.
· Any payment to be made to Mr Ferraro in lieu of notice shall be
calculated based on his Fixed Annual Reward. He would also receive
any statutory entitlements.
· Number of shares equal to the granted Conditional Rights that would
have vested during notice period.
· In addition to the above, Mr Ferraro may terminate his employment by
giving notice to Alumina Limited (effective immediately or up to six
months later) in the event of a Significant Change. In that case Mr Ferraro
will be entitled to receive a payment equal to 12 months’ Fixed Annual
Reward less the amount received during any period of notice served.
He will also be entitled to payment in lieu of accrued annual and long
service leave entitlements.
Galina Kraeva and Stephen Foster2
· No fixed term.
· Six month notice from the
Company, four month notice
from Ms Kraeva.
A payment in lieu of accrued annual and long service leave
entitlements and 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
— nine weeks ex gratia payment.
1. Payable upon termination with notice for reasons other than unsatisfactory performance and suitable alternative employment is not offered
by the Company 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 executive’s status and/or responsibilities that is detrimental to the
executive). Calculated according to the “Base Remuneration”, which is defined as FAR for Mr Ferraro and Ms Kraeva; and FAR + STI at target
for Mr Foster. The above termination entitlements are subject to any restrictions imposed by the Corporations Act 2001.
Alumina LimitedAnnual Report 2023 65
4.5 Cessation of employment
4.7 Clawback policy
Mr Foster retired from the position of the Company
Secretary on 1 July 2023. In accordance with the terms
of his employment contract, on departure, Mr Foster
was paid FAR of $296,400, a pro rata amount of his
FY23 STI of $66,365 assessed at the time of his
retirement and compensation for unused annual and
long service leave of $225,346. Mr Foster also received
Conditional Rights issued for the amount of $73,000.
Prior to cessation of employment, Mr Foster had three
tranches of Performance Rights due for testing in
December 2023, 2024 and 2025, in total 414,000
Performance Rights.
In general and subject to Board discretion, where an
executive ceases employment during the performance
period as a good leaver any unvested incentives will
be pro-rated to time and left-on foot to be tested in
accordance with the original terms of the LTI.
In 2022, the Board determined that, upon cessation
of employment with the Company as a result of
genuine retirement by KMP and being a ‘good leaver’,
unvested Performance Rights would remain on foot
to be tested and vest in the ordinary course of the
plan. Mr Foster’s unvested incentives were treated
as follows:
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.
4.8 Share trading and hedge prohibition
Conditional Rights granted to Executive KMP and
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
· The 2021 Performance Rights were tested in
December 2023 and resulted in zero percent vesting
· buying or selling Alumina Limited securities if they
possess unpublished, price-sensitive information; or
· The 2022 Performance Rights are retained
subject to future testing
· The 2023 Performance Rights are retained on
a pro-rata basis, with 29,772 rights retained and
128,628 rights lapsed (on the basis he was only
employed for 6 months of the relevant
performance period).
4.6 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 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.1
· 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.
This report is made in accordance with a resolution
of the Directors.
W Peter Day
Chairman
26 March 2024
1. In relation to the CEO, where a change of control occurs, the performance conditions for unvested Performance Rights will be
automatically waived and the Performance Rights will therefore vest, unless the Board determines otherwise. The Board may also shorten
the Exercise Period for Performance Rights that vest or have already vested.
66
Financial
Report
The Financial Report covers the consolidated
entity consisting of Alumina Limited (the Company
or parent entity) and its subsidiaries (together the
Group). The financial report is presented in US dollars,
unless otherwise specified.
A description of the nature of the consolidated
entity’s operations and its principal activities is
included in the Operating and Financial Review on
pages 18-41 of the Annual Report. The Operating and
Financial Review is not part of this Financial Report.
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 36, 2 Southbank Boulevard, Southbank
Victoria 3006.
The financial report was authorised for issue by
the Directors on 26 March 2024.
All press releases, financial reports and other
information are available at our Investor Centre
on our website www.aluminalimited.com.
Consolidated Financial Statements
Key Numbers
67
Consolidated statement of profit or
loss and other comprehensive income
68 Consolidated balance sheet
69
Consolidated statement of changes
in equity
70 Consolidated statement of cash flows
85
85
88
89
7. Expenses
8. Income tax expense
9. Equity
10. Cash flow information
Additional Disclosures
Notes to the Consolidated
Financial Statements for the
year ended 31 December 2023
71 About this report
Group structure and
AWAC performance
72
73
78
1. Segment information
2. Investment in associates
3. Investments in controlled entities
90
91
92
93
93
93
95
97
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
Financial and Capital Risk
Signed Reports
78
80
83
4. Financial assets and liabilities
5. Financial risk management
6. Capital management
97 Directors’ declaration
98
Independent auditor’s report to
the members of Alumina Limited
Alumina LimitedAnnual Report 2023 67
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Notes
US$ Million
Revenue from continuing operations
Share of net profit/(loss) of associates accounted for
using the equity method
General and administrative expenses
Foreign exchange gains/(losses)
Finance costs
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year attributable to the owners of
Alumina Limited
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Share of reserve movements accounted for using the
equity method
2(c)
7(a)
7(b)
8
Foreign exchange translation difference
9(b)
Items that will not be reclassified to profit or loss
Re-measurements of post-employment benefit obligations
accounted for using the equity method
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income/(loss) for the year attributable to
the owners of Alumina Limited
2023
0.5
(119.4)
(11.6)
0.2
(19.8)
(150.1)
–
(150.1)
(0.8)
49.3
2022
0.7
120.1
(12.5)
0.1
(4.4)
104.0
–
104.0
2.3
(56.0)
(14.7)
15.8
33.8
(116.3)
(37.9)
66.1
Earnings per share for profit from continuing operations attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
9(a)
9(a)
US Cents
(5.2)
(5.2)
3.6
3.6
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
68
CONSOLIDATED BALANCE SHEET
Notes
US$ Million
2023
2022
Current assets
Cash and cash equivalents
4(a)
Other assets
Total current assets
Non-current assets
Right of use asset
Investment in associates
Total non-current assets
Total assets
Current liabilities
Payables
Provisions and other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liability
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Treasury shares
Reserves
Retained earnings
Total equity
1.7
2.4
4.1
1.6
2(c)
1,729.5
1,731.1
1,735.2
3.1
0.5
3.6
3.8
1.0
4.8
1.9
1,656.0
1,657.9
1,662.7
0.4
0.9
1.3
4(b)
296.0
110.0
1.0
0.6
297.6
301.2
1.3
0.7
112.0
113.3
1,434.0
1,549.4
9(a)
9(a)
2,706.7
2,706.7
(0.4)
(0.8)
(1,401.1)
(1,450.1)
128.8
293.6
1,434.0
1,549.4
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Alumina LimitedAnnual Report 2023 69
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
US$ Million
Contributed
and other
equity1
Reserves
Retained
earnings
Total
Balance as at 1 January 2022
2,705.5
(1,396.8)
376.9
1,685.6
Profit for the year
Other comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Dividends paid
Movement in treasury shares
9(a)
Movement in share-based payments reserve
–
–
–
0.4
–
–
104.0
104.0
(53.7)
15.8
(37.9)
–
–
0.4
(203.1)
(203.1)
–
–
0.4
0.4
Balance as at 31 December 2022
2,705.9
(1,450.1)
293.6
1,549.4
Balance as at 1 January 2023
2,705.9
(1,450.1)
293.6
1,549.4
Profit/(Loss) for the year
Other comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Dividends paid
Movement in treasury shares
9(a)
Movement in share-based payments reserve
–
–
0.4
–
–
(150.1)
(150.1)
48.5
(14.7)
33.8
–
–
0.5
–
–
–
–
0.4
0.5
Balance as at 31 December 2023
2,706.3
(1,401.1)
128.8
1,434.0
1. Comprises contributed equity and treasury shares.
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
70
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Payments to suppliers and employees
(inclusive of goods and services tax)
GST refund received
Dividends received from associates
Finance costs paid
Other
Notes
US$ Million
2023
2022
(11.3)
(10.5)
Net cash inflow/(outflow) from operating activities
10(a)
Cash flows from investing activities
Payments for investments in associates
Proceeds from return of invested capital
Net cash inflow/(outflow) from investing activities
2(c)
(189.1)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning
of the financial year
Effects of exchange rate changes on cash
and cash equivalents
Cash and cash equivalents at the end
of the financial year
204.0
(18.0)
–
186.0
(2.4)
3.8
0.3
1.7
4(a)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
0.4
30.0
(18.7)
0.3
0.7
(189.1)
–
0.5
360.6
(4.1)
0.5
347.0
(212.1)
18.0
(194.1)
164.0
(119.0)
(203.1)
(158.1)
(5.2)
9.1
(0.1)
3.8
Alumina LimitedAnnual Report 2023 71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS FOR THE
YEAR ENDED 31 DECEMBER 2023
About this report
Alumina Limited 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 2023 was
authorised for issue in accordance with a resolution
of the Directors on 26 March 2024.
The consolidated financial report is a general
purpose financial report which:
· incorporates assets, liabilities and results of
operations of all 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 the historical cost
convention, as modified by the revaluation of certain
financial assets and liabilities (including derivative
instruments) at fair value through profit or loss.
· the Company is of a kind referred to in the Australian
Securities 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.
· adopts all new and amended Accounting Standards
and Interpretations issued by the AASB that are
effective for the annual reporting period beginning
1 January 2023.
· 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.
Basis of preparation – going concern
These financial statements have been prepared on a
going concern basis, which assumes the Group will be
able to realise its assets and discharge its liabilities in
the normal course of business.
As outlined in note 15, Alumina Limited (“Alumina”)
announced on 12 March 2024 that it has entered into a
Scheme Implementation Deed with Alcoa Corporation
(“Alcoa”) in relation to a proposal for Alcoa to acquire
100% of the fully paid ordinary shares in Alumina by
way of a scheme of arrangement (“the Transaction”).
In the event that the Transaction proceeds with the
required approvals, Alumina would form part of Alcoa
and future decisions in relation to the Group's ongoing
operations and financing would be the responsibility
of Alcoa. As is typical for transactions of this nature,
completion of the Transaction will give rise to a Review
Event under Alumina’s syndicated revolving cash
advance facility agreement (“Facility”).
Should a Review Event arise Alumina may be required
by the lenders to repay without penalty (other than
Break Costs) all outstanding loans together with accrued
interest and other amounts within 90 business days.
As a result of these matters, there is a material
uncertainty that may cast significant doubt on the
Group’s ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
Notwithstanding the paragraph above, the Transaction
is not subject to any financing conditions and Alumina
expects that Alcoa will address the Review Event
in the course of implementation of the Transaction,
which may include through a refinancing with the
lenders or repayment under the facility, as is customary
for transactions of this nature. Accordingly, Directors
have determined that the financial reports should
be prepared on a going concern basis.
72
The notes to the financial statements
Foreign currency translation
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, or
· 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 Alcoa World Alumina and
Chemicals (“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.
· Additional disclosures: provides information
on items, which require disclosure to comply
with Australian Accounting Standards and other
regulatory pronouncements. However, they
are not considered critical in understanding the
financial performance of the Group and are not
immediately related to the individual line items
in the financial statements.
Accounting policies, critical accounting
estimates and judgements
Significant and other accounting policies that
summarise the measurement basis used and are
relevant to the understanding of the financial
statements, as well as critical accounting estimates
and judgements are provided throughout the notes
to the financial statements.
The consolidated financial statements are presented
in US dollars, which is Alumina Limited’s presentation
and functional currency.
Foreign currency transactions are translated into the
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 share
of such exchange differences is 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 interest in AWAC forms
one reportable segment. A full description of
Alumina Limited’s business model is included in
the Operating and Financial Review on pages 18-41
of the Annual Report.
Alumina LimitedAnnual Report 2023 73
The Group’s interest in AWAC and the assets and liabilities of Alumina Limited are presented below
by geographical location for information purposes.
Year ended 31 December 2023
US$ Million
Australia
Brazil
Spain
Other
Total
Investments in associates
1,038.1
452.0
93.6
145.8
1,729.5
Assets
Liabilities
5.5
(301.0)
0.2
–
–
–
–
5.7
(0.2)
(301.2)
Consolidated net assets
742.6
452.2
93.6
145.6
1,434.0
Year ended 31 December 2022
US$ Million
Australia
Brazil
Spain
Other
Total
Investments in associates
1,000.8
468.6
102.1
84.5
1,656.0
Assets
Liabilities
6.5
(113.3)
0.2
–
–
–
–
–
6.7
(113.3)
Consolidated net assets
894.0
468.8
102.1
84.5
1,549.4
2. INVESTMENT 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
2023
2022
Alcoa of Australia Limited
Bauxite, alumina & aluminium production
Australia
Alcoa World Alumina LLC
Bauxite and alumina trading & production USA
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
40
40
40
40
40
40
40
40
40
40
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 74
2. INVESTMENT IN ASSOCIATES (continued)
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 (AWAC entity) further issues audited
financial statements prepared in accordance with the
requirements of the Corporations Act 2001, Australian
Accounting Standards (AAS) 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 AAS. The principal adjustments are
to create an additional asset retirement obligation
for dismantling, removal and restoration of certain
refineries, 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 recognises 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 AAS. This requires
judgemental assumptions regarding the reclamation
activities, 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 might be impaired by:
· Reviewing whether there are any potential indicators
of impairment such as a significant decline in the
market capitalisation, significant deterioration in
expected future commodity prices, any material
increases in production costs, adverse movements
in exchange rates, production cut backs, increases in
interest rates that might affect the discount rate used
in calculating the recoverable amount and some
others. The effect of climate related risks and
opportunities is also considered when performing
a test for impairment indicators;
· If indicators of impairment exist, calculating the
recoverable amount of the investment in AWAC
using a value in use model (“VIU model”). VIU value
is determined by using a discounted cash flow
method; and
· Comparing the resulting value to the carrying value.
The key assumptions used in the VIU model to
estimate future cash flows are those relating to future
alumina and aluminium prices, exchange rates, energy
prices and other input prices. Key assumptions are
determined with reference to industry participants
and brokers’ forecasts, commodity and currency
forward curves and industry consultant views.
These assumptions are used to estimate future
cash flows in the VIU model. The estimated cash
flows are then discounted to net present value
using the weighted average cost of capital (WACC)
of 10.0% (2022: 9.5%).
Furthermore, the following sensitivity analyses
(stress testing) are performed over the value in
use calculation:
· Commodities, including aluminium, alumina, caustic,
coal, oil and gas price fluctuations (plus or minus
10%). AWAC’s future cash flows are most sensitive
to alumina price fluctuations.
· Currency rate fluctuation (plus or minus 10%).
· Increased WACC.
As a final check, the carrying value of the investment
in associates is compared to Alumina Limited’s market
capitalisation and to major analysts’ valuations.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and
value in use.
Alumina LimitedAnnual Report 2023 75
In the year ended 31 December 2023, a potential impairment trigger was identified and, accordingly,
management estimated the recoverable value for the Group’s investment in AWAC.
The recoverable amount of the investment in AWAC exceeds its carrying value and, therefore, no impairment
loss was recognised in the year ended 31 December 2023 (2022: nil).
c) Summarised financial information for AWAC
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 the equity method, including adjustments
for differences in accounting policies.
Summarised Balance Sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Reconciliation to investment in associates balance:
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
US$ Million
2023
2022
1,713.9
4,970.6
1,661.2
4,815.6
(1,356.1)
(1,442.2)
(1,598.4)
(1,491.9)
3,730.0
3,542.7
40%
40%
1,492.0
1,417.1
175.8
92.1
(30.4)
175.8
94.2
(31.1)
Carrying value
1,729.5
1,656.0
Reconciliation of carrying amount:
Opening carrying value 1 January
1,656.0
1,741.8
Net additional (return)/funding in AWAC entities
(Loss)/profit for the year
Other comprehensive (loss)/income for the year
Dividends and distributions paid
Closing carrying value
189.1
(119.4)
33.8
(30.0)
194.1
120.1
(39.4)
(360.6)
1,729.5
1,656.0
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 76
2. INVESTMENT IN ASSOCIATES (continued)
Summarised statement of profit or loss and
other comprehensive income
Revenues
(Loss)/profit from continuing operations
(Loss)/profit for the year
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Reconciliation to share of net profit of associates:
Group Share of (loss)/profit for the year as a percentage
Group Share of (loss)/profit for the year in dollars
Mineral rights and bauxite amortisation
Movement in deferred tax liability on mineral rights and bauxite assets
US$ Million
2023
2022
5,396.3
5,714.5
(294.8)
(294.8)
84.6
(210.2)
40%
(117.9)
(2.1)
0.6
304.0
304.0
(98.4)
205.6
40%
121.6
(2.1)
0.6
120.1
Share of net (loss)/profit of associates accounted for using equity method
(119.4)
d) Commitments and contingent
liabilities for AWAC
Contingent liabilities – claims
There are potential obligations 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,
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. Therefore,
it is possible that the 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 entity
or asset with which the liability is associated.
As previously reported, the Australian Taxation Office
(ATO) has undertaken a transfer pricing examination
in respect of certain historical third-party alumina
sales made by Alcoa of Australia Limited (AoA) over
a 20-year period. As a result of that examination,
the ATO had issued a statement of audit position
(SOAP) to AoA. The SOAP was the subject of an
internal review process within the ATO.
The ATO completed that process, and on 7 July 2020
issued AoA with Notices of Assessment (the Notices)
in respect of this matter. The Notices assert claims
for additional income tax payable by AoA of
approximately A$214 million. The Notices also include
claims for compounded interest on the primary tax
amount totalling approximately A$707 million.
In accordance with the ATO’s dispute resolution
practices, on 30 July 2020, AoA paid 50% of the
assessed primary income tax amount (exclusive of
interest and any penalties), being approximately
A$107 million, out of cash flows. In exchange, the
ATO will not seek further payment prior to final
resolution of the matter.
On 17 September 2020, the ATO issued a position
paper with its preliminary view on the imposition of
administrative penalties related to the tax assessment
issued to AoA. This paper proposed penalties of
approximately A$128 million.
Alumina LimitedAnnual Report 2023 77
AoA disagreed with the Notices and with the ATO’s
proposed position on penalties. In September 2020,
AoA lodged formal objections to the Notices. In the
fourth quarter of 2020, AoA provided a submission on
the ATO’s imposition of interest, and also submitted a
response to the ATO’s position paper on penalties. AoA
submissions propose that the interest amount should
be remitted (i.e. should not be fully payable) and no
penalties should be payable. After the ATO completes
its review of AoA’s response to the penalties position
paper, the ATO could issue a penalty assessment.
On 1 February 2022, AoA submitted statutory notices
to the ATO requiring the ATO to make decisions on
AoA’s objections within a 60-day period. On 1 April
2022, the ATO issued its decision disallowing the
Company’s objections related to the income tax
assessment, while the position on penalties and
interest remains outstanding.
On 29 April 2022, AoA filed proceedings in the
Australian Administrative Appeals Tribunal (AAT)
against the ATO to contest the Notices, a process
which could last several years. The AAT held the first
directions hearing on 25 July 2022 ordering AoA to
file its evidence and related materials by 4 November
2022, ATO to file its materials by 14 April 2023 and
AoA to file reply materials by 26 May 2023. AoA filed
its evidence and related materials on 4 November
2022. The ATO filed its evidence on 13 November
2023, after seeking and being granted a series
of extensions. AoA filed reply evidence on
15 March 2024. The matter is listed for hearing
before the AAT on 3 to 28 June 2024.
AoA’s obligation to make any further payment of
the primary tax amount, or payment of any penalty
or interest amount, will be determined through the
objection and court processes available to AoA.
If AoA is ultimately fully successful, the 50%-part
payment to the ATO would be refunded. Further
interest on the unpaid amounts will continue to
accrue during the dispute.
The Company understands that AoA will defend
its position in respect of the ATO’s Notices and
any penalties imposed.
St. Croix Proceedings – Abednego
and Abraham cases.
In January 2010, Alcoa Corporation was served with
a multi-plaintiff action complaint involving several
thousand individual persons claiming to be residents
of St. Croix alleging personal injury or property
damage from Hurricane Georges or winds blowing
material from the St. Croix Alumina, L.L.C. (SCA)
facility on the island of St. Croix (U.S. Virgin Islands).
This complaint, Abednego, et al. v. Alcoa, et al.,
which added the then current owners of the facility
to a February 1999 action, was filed in the Superior
Court of the Virgin Islands, St. Croix Division.
In 2012, Alcoa was served with a separate multi-plaintiff
action alleging claims essentially identical to those
set forth in the Abednego v. Alcoa complaint. In 2015,
the Superior Court dismissed all plaintiffs’ complaints
without prejudice, permitting the plaintiffs to re-file
the complaints individually. In 2017, the court issued
an order that consolidated all timely complaints into
the Red Dust Claims docket (Master Case No.: SX-15-
CV-620). Following this order, a total of approximately
430 complaints were filed and accepted by the court,
which included claims of approximately 1,360
individuals. In November 2018, the Red Dust Claims
docket was transferred to the Complex Litigation
Division within the Superior Court of the Virgin Islands.
At such time, the Alcoa was unable to reasonably
predict an outcome or to estimate a range of reasonably
possible loss, and thereafter the Red Dust Claims docket
became inactive for several years. The Court issued an
amended case management order dividing the
complaints filed in the Red Dust docket into groups
of 50 complaints, designated Groups A though I in
March 2022. The parties selected 10 complaints from
Group A to proceed to trial as the Group A lead cases.
In November 2023, the Court issued an amended case
management order with regard to the Group A lead
cases scheduling trials to begin in July 2024. Trials with
regard to the Group A lead cases will continue through
March 2025. Concurrently, the Court is considering
discovery issues with respect to other group cases.
Alcoa remains unable to reasonably predict an outcome
or to estimate the range of reasonably possible loss
in the Red Dust Claims docket cases.
Commitments
AWAC has outstanding bank guarantees and letters
of credit primarily related to environmental and
leasing obligations, legal matters, and customs
duties, among others. The total amount committed
under these instruments, which automatically renew
or expire at various dates, between 2024 and 2025,
was $128.0 million at 31 December 2023.
AWAC has outstanding surety bonds primarily
related to customs duties. The total amount committed
under these bonds, which automatically renew or
expire at various dates, between 2026 and 2028,
was $22.7 million at 31 December 2023.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 78
3. INVESTMENT IN CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Alumina Limited as
at 31 December 2023 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 2023 are set out below.
Name
Notes
Place of
incorporation
Percentage
ownership
2023
2022
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
A
A
B
C
A
D
B
D
D
VIC, Australia
VIC, Australia
Delaware, USA
VIC, Australia
VIC, Australia
Brazil
Delaware, USA
Brazil
UK
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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 it is non-operating or audited accounts is not required in its country of incorporation.
Appropriate books and records are maintained for the company.
C. The company has been granted relief from the necessity to prepare accounts pursuant to Australian Securities and Investment Commission
(ASIC) Class Order 2016/785. For further information refer Note 17.
D. A company that prepares separate audited accounts in the country of incorporation.
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.
vAlumina LimitedAnnual Report 2023 79
2023
US$ Million
At fair value through
profit or loss
At amortised
cost
Total
Cash and cash equivalents – Note 4(a)
Total financial assets
Payables
Borrowings – Note 4 (b)
Lease liability
Total financial liabilities
Net financial (liabilities)/assets
2022
Cash and cash equivalents – Note 4(a)
Total financial assets
Payables
Borrowings – Note 4 (b)
Lease liability
Total financial liabilities
Net financial (liabilities)/assets
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.7
1.7
(3.1)
(296.0)
(1.3)
(300.4)
(298.7)
US$ Million
3.8
3.8
(0.4)
(110.0)
(1.6)
(112.0)
(108.2)
1.7
1.7
(3.1)
(296.0)
(1.3)
(300.4)
(298.7)
3.8
3.8
(0.4)
(110.0)
(1.6)
(112.0)
(108.2)
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 approximate their
fair values.
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
Total cash and cash equivalents as per the Statement of Cash Flows
US$ Million
2023
2022
1.7
1.7
3.8
3.8
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 80
4. FINANCIAL ASSETS AND LIABILITIES (continued)
b) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Fees paid on establishment of loan facilities are recognised as transaction costs to the extent that it is probable
that some or all of a facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or all of a facility will be drawn down, the fee is capitalised
as a prepayment for the liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the balance sheet date. Refer to note 5(c).
Bank loans
Total borrowings
US$ Million
2023
296.0
296.0
2022
110.0
110.0
Bank loans
Alumina Limited has a US$500 million syndicated bank facility with tranches maturing in October 2025 (US$100
million), January 2026 (US$150 million), July 2026 (US$150 million) and June 2027 (US$100 million).
As at 31 December 2023, there was US$296 million drawn against the syndicated facility (2022: US$110 million).
5. FINANCIAL RISK MANAGEMENT
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future
financial performance.
Risk
Exposure arising from
Measurement
Management
Market risk:
foreign currency
Financial assets and liabilities denominated
in a currency other than US$
Cash flow forecasting
& sensitivity analysis
Market risk:
interest rate
Credit risk
Long-term borrowings at fixed rates
Sensitivity analysis
Cash and cash equivalents, and
derivative financial instruments
Credit ratings
Liquidity risk
Borrowings and other liabilities
Cash flow forecasting
Cross-currency interest
rate swaps
Foreign currency
forwards
Cross-currency interest
rate swaps
Credit limits, letters of
credit, approved
counterparties list
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.
Alumina LimitedAnnual Report 2023 81
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.
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$,
was as follows:
USD
AUD
Other
Total
2023
US$ Million
Cash and cash equivalents
Total non-derivative financial assets
Payables
Borrowings
Total non-derivative financial liabilities
1.2
1.2
–
(296.0)
(296.0)
Net non-derivative financial assets/(liabilities)
(294.8)
Net financial assets/(liabilities)
(294.8)
0.4
0.4
(3.1)
–
(3.1)
(2.7)
(2.7)
2022
US$ Million
Cash and cash equivalents
Total non-derivative financial assets
Payables
Borrowings
Total non-derivative financial liabilities
2.8
2.8
–
(110.0)
(110.0)
Net non-derivative financial assets/(liabilities)
(107.2)
Net financial assets/(liabilities)
(107.2)
Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from its borrowings.
0.6
0.6
(0.4)
–
(0.4)
0.2
0.2
0.1
0.1
–
–
–
0.1
0.1
0.4
0.4
–
–
–
0.4
0.4
1.7
1.7
(3.1)
(296.0)
(299.1)
(297.4)
(297.4)
3.8
3.8
(0.4)
(110.0)
(110.4)
(106.6)
(106.6)
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.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 82
5. FINANCIAL RISK MANAGEMENT (continued)
The consolidated entity’s exposure to interest rate risk and the effective weighted interest rate after the effect
of derivative instruments is set out below:
Floating
interest
Fixed
interest
Non-interest
bearing
Total
2023
US$ Million
Cash and cash equivalents
Total non-derivative financial assets
Payables
Borrowings
Total non-derivative financial liabilities
1.7
1.7
–
(296.0)
(296.0)
Net non-derivative financial assets/(liabilities)
(294.3)
Weighted average interest rate
7.13%
–
–
–
–
–
–
2022
US$ Million
Cash and cash equivalents
Total non-derivative financial assets
Payables
Borrowings
Total non-derivative financial liabilities
3.8
3.8
–
(110.0)
(110.0)
Net non-derivative financial assets/(liabilities)
(106.2)
Weighted average interest rate
3.91%
–
–
–
–
–
–
–
–
–
(3.1)
1.7
1.7
(3.1)
–
(296.0)
(3.1)
(3.1)
–
–
(0.4)
(299.1)
(297.4)
3.8
3.8
(0.4)
-
(110.0)
(0.4)
(0.4)
–
(110.4)
(106.6)
–
Had interest rates on floating rate debt during 2023 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$2.3 million lower/higher
(2022: US$0.5 million lower/higher).
b) Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to customers, including outstanding receivables and committed
transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A-‘are
accepted, and exposure limits are assigned based on actual independent rating under Board approved guidelines.
Credit risk further arises in relation to cross guarantees given to wholly owned subsidiaries (see Note 17 for
details). Such guarantees are only provided in exceptional circumstances and are subject to Board approval.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represent the Group’s maximum exposure to credit risk.
Alumina LimitedAnnual Report 2023 83
c) Liquidity risk
Prudent liquidity risk management requires maintaining sufficient cash and credit facilities to ensure the Group’s
commitments and plans can be met. This is managed by maintaining committed undrawn credit facilities to cover
reasonably expected forward cash requirements. Management monitors rolling forecasts of the Group’s liquidity,
including undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows.
The Group had the following undrawn borrowing facilities at the end of the reporting period:
Expiring beyond one year
Total undrawn borrowing facilities
US$ Million
2023
204.0
204.0
2022
240.0
240.0
The table below details the Group’s remaining contractual maturity for its financial liabilities.
Less than
6 months
6-12
months
1-2
years
2-5
years
Total
2023
Payables
Borrowings
Lease liability
Total non-derivative financial liabilities
2022
Payables
Borrowings
Lease liability
Total non-derivative financial liabilities
6. CAPITAL MANAGEMENT
a) Risk management
US$ Million
–
–
3.1
100.0
196.0
296.0
0.3
0.7
1.3
100.3
196.7
300.4
US$ Million
–
–
0.3
0.3
–
0.4
110.0
110.0
1.0
1.6
111.0
112.0
–
–
0.1
0.1
–
–
0.1
0.1
3.1
–
0.2
3.3
0.4
–
0.2
0.6
The Group’s objective when managing capital is to safeguard the ability to continue as a going concern, so
that it can continue to provide returns for shareholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.
The Group calculates the gearing ratio as net debt divided by total capital. Net debt is calculated as total
borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance
sheet plus debt.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 84
6. CAPITAL MANAGEMENT (continued)
The gearing ratios at 31 December 2023 and 31 December 2022 were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt
Total borrowings
Total equity
Total capital
Gearing ratio
b) Dividends
No interim dividend declared (2022: US4.2 cents fully franked at 30% per
fully paid share declared 23 August 2022 and paid on 15 September 2022)
No final dividend declared (2022: US2.8 cents fully franked at 30% per fully
paid share declared 28 February 2022 and paid on 17 March 2022)
Total dividends
US$ Million
2023
296.0
(1.7)
294.3
296.0
1,434.0
1,730.0
17.0%
US$ Million
2023
–
–
–
2022
110.0
(3.8)
106.2
110.0
1,549.4
1,659.4
6.4%
2022
121.9
81.2
203.1
No final dividend was declared for the financial year ended 31 December 2023 (2022: no final dividend was
declared for the financial year ended 31 December 2022).
c) Franked dividends
Franking credits available for subsequent financial years,
based on a tax rate of 30% (2022: 30%)
A$ Million
2023
493.4
2022
474.2
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.
Fully franked dividends received from AWAC in the financial year
US$ Million
2023
30.0
2022
360.6
Alumina LimitedAnnual Report 2023 85
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
the reporting date at expected pay rates in respect of
employees’ services up to that date, including related
on-costs.
The liability for long service leave is recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be made
in respect of services provided by employees up to the
reporting date. Consideration is given to expected
future wage and salary levels, experience of employee
departures and periods of service. Expected future
payments are discounted using market yields at the
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 upon retirement, disability or death from
the Group’s superannuation plan. Alumina Limited’s
employees are members of the 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 of 11 percent
(10.5 percent prior 1 July 2023) of basic salary to each
member’s account. Members also have the option
to make voluntary contributions to their account.
Employer contributions to these funds are recognised
as an expense.
Profit/(loss) before income tax included the following specific expenses:
Defined contribution superannuation expense
Other employee benefits expense
Total employee benefits expense
b) Finance costs
US$ Million
2023
2022
0.3
4.5
4.8
0.3
5.5
5.8
Finance costs comprise interest payable on borrowings using the effective interest rate method, commitment fees
and amortisation of capitalised facility fees.
Finance costs:
Interest expense
Commitment and upfront fees
Amortisation of capitalised upfront fees
Total finance costs
8. INCOME TAX EXPENSE
a) Income tax expense and deferred taxes
US$ Million
2023
2022
16.9
2.6
0.3
19.8
1.5
2.6
0.3
4.4
The income tax expense/benefit for the period is the tax payable/receivable on the current period’s taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and 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.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 86
8. INCOME TAX EXPENSE (continued)
Current tax
Deferred tax
Aggregate income tax expense
US$ Million
2023
2022
–
–
–
–
–
–
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements.
Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted
by the reporting date and are expected to apply when
the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised
for temporary differences between the carrying
amount and tax bases of investments in controlled
entities where the parent entity is able to control
the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse
in the foreseeable future.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances
relate to the same taxation authority. Current tax assets
and liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the
liability simultaneously.
Alumina Limited and its wholly-owned Australian
controlled entities have implemented the tax
consolidation legislation. As a consequence, these
entities are taxed as a single entity and the deferred
tax assets and liabilities of these entities are set off
in the consolidated financial statements.
The Group’s deferred tax assets and liabilities are attributable to the following:
Deferred tax liabilities
Right of use asset
Total deferred tax liabilities
Deferred tax assets
Employee benefits
Lease liability
Other
Total deferred tax assets other than tax losses
Net deferred tax assets/(liabilities) before tax losses
Deductible temporary differences and tax losses not recognised
Net deferred tax assets/(liabilities)
US$ Million
2023
2022
(0.5)
(0.5)
1.1
0.4
0.4
1.9
1.4
(1.4)
–
(0.5)
(0.5)
0.9
0.5
0.6
2.0
1.5
(1.5)
–
Deferred tax assets are recognised only to the extent of deferred tax liabilities existing at the 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.
Alumina LimitedAnnual Report 2023 87
b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(loss) before income tax
Prima facie tax income/(expense) for the period at the rate of 30%
US$ Million
2023
(150.1)
45.0
2022
104.0
(31.2)
The following items caused the total charge for income tax to vary from the above:
Share of equity accounted profit not assessable for tax
119.4
(120.1)
Foreign income subject to accruals tax
Tax losses not recognised
Non-deductible expenses
Net movement
Tax Effect of the above adjustments at 30% (2022:30%)
Aggregate income tax expense
1.8
28.0
0.9
150.1
(45.0)
–
4.8
10.7
0.6
(104.0)
31.2
–
c) Tax expense relating to items of comprehensive income
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 (credit)/expense relating to items of other comprehensive income
d) Tax losses not recognised
Tax losses – revenue
Tax losses – capital
Total unused tax losses
Potential tax benefit – revenue
Potential tax benefit – capital
Total potential tax benefit
US$ Million
2023
(0.3)
7.1
6.8
2022
1.0
8.2
9.2
US$ Million
2023
1,274.6
1,142.0
2022
1,230.8
1,142.0
2,416.6
2,372.8
307.3
342.6
649.9
295.0
342.6
637.6
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 88
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.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Movement in share capital
Number of shares
US$ Million
2023
2022
2023
2022
Balance brought forward
2,901,681,417
2,901,681,417
2,706.7
2,706.7
Movement for the year1
–
–
–
–
Total issued capital
2,901,681,417
2,901,681,417
2,706.7
2,706.7
1. Movement for the year represents shares issued under the Dividend Reinvestment Plan.
Treasury shares
Treasury shares are Alumina Limited shares held by the Alumina Employee Share Plan Trust for the purpose
of issuing shares under the Alumina Employee Share Plan.
Movement in share capital
Number of shares
US$ Million
2023
2022
2023
2022
Balance brought forward
605,042
993,630
788,114
1,198,836
There were no shares acquired by
Alumina Employee Share Plan Pty Ltd
during the (2022: Nil)
–
–
–
–
Employee performance rights vested
(288,317)
(388,588)
(381,378)
(410,722)
Total treasury shares
316,725
605,042
406,736
788,114
The weighted average number of ordinary shares used as the denominator in the calculation of basic earnings
per share is calculated as the weighted average number of ordinary shares outstanding during the financial year,
adjusted for treasury shares issued.
Number of shares
2023
2022
Weighted average number of ordinary shares used as the denominator in
the calculation of basic and diluted earnings per share
2,901,337,835
2,901,064,664
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.
Alumina LimitedAnnual Report 2023 89
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.
US$ Million
2023
2022
Balance at the beginning of the financial year
(1,517.6)
(1,461.6)
Currency translation differences arising during the year
49.3
(56.0)
Balance at the end of the financial year
(1,468.3)
(1,517.6)
10. CASH FLOW INFORMATION
a) Reconciliation of profit after income tax to net cash inflow from operating activities
(Loss)/profit from continuing operations after income tax
Share of net profit/(loss) of associates accounted for using the 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 payables
(Decrease)/increase in other liabilities
(Decrease)/increase in provisions
Decrease/(increase) in other assets
Net cash inflow from operating activities
US$ Million
2023
(150.1)
119.4
30.0
1.0
(0.4)
(0.1)
2.7
(0.3)
(0.5)
(1.1)
0.7
2022
104.0
(120.1)
360.6
1.0
1.4
346.9
0.1
(0.4)
(0.5)
0.9
347.0
b) Non-cash financing and investing activities
There were no non-cash financing and investing activities during the year ended 31 December 2023.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 90
10. CASH FLOW INFORMATION (continued)
c) Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
2022
3.8
(110.0)
(106.2)
3.8
(110.0)
(106.2)
Total
(55.9)
(50.2)
(0.1)
–
US$ Million
2023
1.7
(296.0)
(294.3)
1.7
(296.0)
(294.3)
US$ Million
Cash/bank
overdraft
Borrowings
due within
1 year
Borrowings
due after
1 year
9.1
(5.2)
(0.1)
–
3.8
(2.4)
0.3
–
1.7
–
–
–
–
–
–
–
–
–
(65.0)
(45.0)
–
–
(110.0)
(106.2)
(186.0)
(188.4)
–
–
0.3
–
(296.0)
(294.3)
Cash and cash equivalents
Borrowings – repayable after one year
Net debt
Cash and liquid investments
Gross debt – fixed interest rates
Net debt
Net debt as at 1 January 2022
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 31 December 2022
Cash flows
Foreign exchange adjustments
Other non-cash movement
Net debt as at 31 December 2023
Additional disclosure
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.
Alumina LimitedAnnual Report 2023 91
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 42 to 65 of this annual report.
The remuneration report has been presented in Australian dollars, whilst the financial report has been presented
in US dollars. The average exchange rate for 2023 of 0.6643 (2022: 0.6945) has been used for conversion.
Short-term employee benefits
Post-employment and termination benefits
Share based payments
Total
US$ 000’s
2023
2,408
114
770
2022
3,064
888
702
3,292
4,654
c) Other transactions and balances with related parties
There have been no other related party transactions made during the year or balances outstanding as at
31 December 2023, between the Group, its related parties, the Directors or key management personnel (2022: Nil)
12. SHARE-BASED PAYMENTS
The Group provides benefits to employees (including the 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 42 to 65 of this
annual report.
Set out below are summaries of performance rights granted under the ESP.
Grant
date
Expiry
date
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
Yet to be
exercised
at the
end of
the year
number
Yet to
vest at
the end of
the year
number
2023
25/01/2021 13/12/2023 666,575
03/02/2022 9/12/2024
638,119
–
–
19/01/2023 7/12/2025
–
824,400
Total
2022
1,304,694
824,400
20/01/2020 12/12/2022 549,800
25/01/2021 13/12/2023 790,700
–
–
03/02/2022 9/12/2024
–
711,800
Total
1,340,500
711,800
–
–
–
–
–
–
–
–
(666,575)
–
(11,973)
626,146
(153,801)
670,599
–
–
–
–
626,146
670,599
(832,349) 1,296,745 –
1,296,745
(549,800)
–
(124,125)
666,575
(73,681)
638,119
–
–
–
–
666,575
638,119
(747,606) 1,304,694 –
1,304,694
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 92
12. SHARE-BASED PAYMENTS (continued)
The weighted average remaining contractual life of performance rights outstanding at the end of the period
was 1.5 years (2022: 1.4 years).
In addition to the ESP, the share-based payments remuneration for certain executive employees includes an
annual share right component. This component is conditional on a minimum of 12 months service and subject
to three years trading restriction from the date of the grant.
For further details refer to the remuneration report on page 46 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
CFO annual conditional share rights grant
Annual conditional rights granted to other employees
Total
13. REMUNERATION OF AUDITORS
US$ 000's
2023
2022
392
325
60
112
889
384
328
52
–
764
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 financial reports
Overseas taxation services
Total
US$ 000's
2023
2022
471
3
40
40
554
473
3
30
30
536
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.
Alumina LimitedAnnual Report 2023 93
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 2023 and 31 December 2022,
other than as disclosed in Note 2(d) and Note 16(c).
15. EVENTS OCCURRING AFTER THE
REPORTING PERIOD
Curtailment of Kwinana Alumina Refinery
On 8 January 2024, Alcoa Corporation announced
plans to fully curtail the Kwinana refinery in Western
Australia (“WA”), beginning in the second quarter
of 2024. The decision to curtail the refinery came in
response to losses incurred at the refinery together
with its age, scale, high costs of operation and current
bauxite grades. Since the start of 2023, the refinery
had been operating at approximately 80 per cent
of its annual capacity.
The Kwinana refinery and associated residue storage
areas will continue to be actively managed by Alcoa.
Alcoa’s facilities in the Port of Kwinana will also
continue to operate to import raw materials and export
alumina produced at the Pinjarra refinery. Production
at the Pinjarra and Wagerup refineries is not expected
to be impacted by the curtailment at Kwinana.
A Scheme Implementation Deed with Alcoa
Corporation
Alumina Limited (“Alumina”) announced on
12 March 2024 that it has entered into a Scheme
Implementation Deed (“SID”) with Alcoa Corporation
(“Alcoa”) in relation to a proposal for Alcoa to acquire
100% of the fully paid ordinary shares in Alumina by
way of a scheme of arrangement (“the Transaction”).
Under the terms of the SID, eligible Alumina
shareholders will be entitled to receive 0.02854
shares of Alcoa common stock (in the form of ASX-
listed Alcoa CHESS Depositary Interests (CDIs)) for
each Alumina share held.
The Independent Non-executive Directors and
Managing Director and CEO of Alumina recommend
that Alumina shareholders vote in favour of the
Transaction, in the absence of a superior proposal
for Alumina and subject to the independent
expert concluding (and continuing to conclude)
that the Transaction is in the best interests of Alumina
shareholders. The Non-Independent Non-executive
Director of Alumina abstained from making a
recommendation.
The SID is subject to customary deal protections for
both Alcoa and Alumina, including no shop, no talk,
no due diligence and notification obligations. Alumina
is also bound by other customary provisions, including
a matching right for Alcoa in the event of a competing
proposal for Alumina. The Transaction is subject to a
number of conditions, including approval of Alumina
shareholders at a scheme meeting.
16. PARENT ENTITY FINANCIAL
INFORMATION
The financial information for the parent entity has
been prepared on the same basis as the consolidated
financial statements, except as set out below.
Investments in subsidiaries, associates and
joint venture entities
Investments in subsidiaries, associates and joint
venture entities are accounted for at cost in the
financial statements of Alumina Limited. Dividends
received from associates are recognised in the parent
entity’s profit or loss, rather than being deducted
from the carrying amount of these investments.
Where the parent entity has provided financial
guarantees in relation to loans and payables of
subsidiaries for no compensation, the fair values of
these guarantees are accounted for as contributions
and recognised as part of the cost of the investment.
Intercompany loans
Loans granted by the parent entity to its subsidiaries
are classified as non-current assets.
Tax consolidation legislation
Alumina Limited and its wholly-owned Australian
controlled entities have implemented tax consolidation
legislation. The head entity, Alumina Limited, and the
controlled entities in the tax consolidated Group
account for their own current and deferred tax
amounts. These tax amounts are measured as if each
entity in the tax consolidated Group continues to be
a standalone taxpayer in its own right. In addition to
its own current and deferred tax amounts, Alumina
Limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated Group.
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 94
16. PARENT ENTITY FINANCIAL INFORMATION (continued)
a) Summarised financial information
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
b) Guarantees entered into by the
parent entity
The parent entity has provided guarantees in
relation to the performance of contracts by various
AWAC companies.
Guarantees relating to Alumina Espanola SA
(‘Espanola’)
Alumina Limited has proportionally (40%) guaranteed
the payment of the obligations of Espanola in relation
to certain financial services provided by a bank. The
maximum amount payable under the guarantee is
EUR10.0 million and the guarantee expires on 15th
October 2024.
Alumina Limited has agreed to guarantee the
proportional share of Espanola's obligations (40%)
for the purchase of natural gas for alumina refining
operations at the San Ciprian refinery. The maximum
amount guaranteed by Alumina Limited shall not
exceed EUR8.0 million. The guarantee by Alumina
Limited has expired on 29 February 2024. However,
Alumina Espanola’s gas contract is renewed as a
periodic agreement and, accordingly, the proportional
guarantee issued by Alumina Limited is expected to
be extended.
US$ Million
2023
2022
3.9
4.5
4,133.8
3,945.6
3.4
307.8
0.9
119.7
2,706.7
2,706.7
237.7
881.6
237.2
882.0
3,826.0
3,825.9
(0.4)
(0.4)
344.8
344.8
Alumina, at the request of Alcoa of Australia has
also entered into a guarantee for the performance
of Espanola through an intercompany short-term
loan agreement if required. This will expire on the
27th September 2025.
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 above mentioned guarantees,
as the fair values of the guarantees are immaterial.
c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities
as at 31 December 2023 or 31 December 2022. 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 as at 31 December 2023.
Alumina LimitedAnnual Report 2023 95
17. DEED OF CROSS GUARANTEE
Alumina Limited and Alumina International Holdings Pty. Ltd. are parties to a 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
2016/785 (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
US$ Million
Dividends and distributions
Other income
General and administrative expenses
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
2023
30.0
0.5
(11.3)
0.2
(19.8)
(0.4)
–
(0.4)
–
(0.4)
749.2
(0.4)
–
748.8
2022
360.6
0.7
(12.1)
–
(4.4)
344.8
–
344.8
–
344.8
607.5
344.8
(203.1)
749.2
Notes to the Consolidated Financial Statements for the year ended 31 December 2023 96
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
Right of use asset
Investment in associates
Other financial assets
Total non-current assets
Total assets
Current liabilities
Payables
Provisions and other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
US$ Million
2023
2022
1.5
632.4
2.4
636.3
1.6
1,631.8
1,730.6
3,364.0
4,000.3
2.6
0.9
3.5
3.7
480.7
0.8
485.2
2.5
1,631.4
1,693.9
3,327.8
3,813.0
0.3
0.9
1.2
301.9
115.9
1.0
0.5
303.4
306.9
1.9
0.7
118.5
119.7
3,693.4
3,693.3
2,706.7
2,706.7
237.9
748.8
237.4
749.2
3,693.4
3,693.3
Alumina LimitedAnnual Report 2023 97
The amendments listed above did not have any
impact on the amounts recognised in prior periods
and are not expected to significantly affect the current
or future periods.
ii) Not yet adopted by the Group
Certain amendments to accounting standards
have been published that are not mandatory for
31 December 2023 reporting period and have not
been early adopted by the Group. These amendments
are not expected to have a material impact on the
entity in the current or future reporting periods and
on foreseeable future transactions.
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.
18. NEW ACCOUNTING STANDARDS
AND INTERPRETATIONS
i) Adopted by the Group
The group has applied the following standards
and amendments for the first time for their annual
reporting period commencing 1 January 2023:
· AASB 17 Insurance Contracts
· AASB 2023-2 Amendments to Australian Accounting
Standards – Definition of Accounting Estimates
International Tax Reform – Pillar Two Model Rules
AASB 112
· AASB 2021-5 Amendments to Australian Accounting
Standards – Deferred Tax related to Assets and
Liabilities arising from a Single Transaction AASB 112
· AASB 2021-2 Amendments to Australian Accounting
Standards – Disclosure of Accounting Policies
Definition of Accounting Estimates AASB 7, AASB 101,
AASB 108, AASB 134 & AASB Practice Statement 2.
DIRECTORS’ DECLARATION
In the Directors’ opinion:
a) the financial statements and notes set out on pages
66 to 97 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
2023 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.
W Peter Day
Chairman
26 March 2024
vNotes to the Consolidated Financial Statements for the year ended 31 December 2023 98
Independent
Auditor’s Report
· the consolidated statement of cash flows for
the year then ended
· the consolidated statement of profit or loss and other
comprehensive income for the year then ended
· the notes to the consolidated financial statements,
including material accounting policy information
and other explanatory information
· 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 Group in accordance
with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements
of the Accounting Professional & Ethical Standards
Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards)
(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.
To the members 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:
· giving a true and fair view of the Group's financial
position as at 31 December 2023 and of its financial
performance for the year then ended
· complying with Australian Accounting Standards
and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
· the consolidated balance sheet as at
31 December 2023
· the consolidated statement of changes in
equity for the year then ended
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Liability limited by a scheme approved under Professional Standards Legislation.
Alumina LimitedAnnual Report 2023 99
Material uncertainty related to going concern
We draw attention to the section “Basis of preparation
– going concern” in the Notes to the consolidated
financial statements which describes that Alumina
Limited has entered into a Scheme Implementation
Deed with Alcoa Corporation and completion of the
transaction will give rise to a Review Event under
Alumina’s syndicated revolving cash advance facility
agreement. These conditions, along with other matters
set forth in the section “Basis of preparation – going
concern”, indicate that a material uncertainty exists that
may cast significant doubt on the Group's ability to
continue as a going concern. Our opinion is not
modified in respect of this matter.
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.
The Group’s sole business undertaking is investing
globally in bauxite mining and alumina refining with
some minor alumina-based chemical businesses and
aluminium smelting operations. All of these business
activities are conducted through the Group’s 40%
investment in several entities (including Alcoa of
Australia Limited) 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. The Group’s equity interest
in AWAC forms one reportable segment. The Group
participates in AWAC through the Strategic Council,
which consists of three members appointed by
Alcoa Corporation and two members appointed by
the Group. As the Group 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 in an associate and is accounted for under the
equity method.
Audit Scope
· Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
· The Group engagement team directed the
involvement of the component audit teams,
which performed an audit of the financial
information of Alcoa of Australia and AWAC.
· The Group engagement team determined and
undertook an appropriate level of involvement in
the work performed by the component audit teams,
in order for us to be satisfied that sufficient audit
evidence had been obtained to support our opinion
on the Group financial report as a whole. We had
regular communication with the component audit
teams throughout the year and performed a review
of their audit working papers.
· 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 are prepared under
US GAAP), to comply with Australian Accounting
Standards (AAS).
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. We communicated
the key audit matters to the Audit and Risk Committee.
In addition to the matter described in the Material
uncertainty related to going concern section, we have
determined the matters described below to be the key
audit matters to be communicated in our report.
100
Key audit matter
How our audit addressed the key audit matter
Equity accounting for Alumina Limited’s
investment in AWAC
(Refer to note 2)
Alumina Limited’s equity accounted investment in AWAC
is carried at US$1,729.5 million and its current year share
of the net loss of AWAC, accounted for using the equity
accounting method, is US$119.4 million.
The equity accounting method requires consistent
accounting standards to be applied by the investing
company and its associates. Alcoa of Australia Limited, a
component of AWAC, already prepares financial information
under Australian Accounting Standards (AAS), therefore no
conversion is required.
The financial information of AWAC entities other
than Alcoa of Australia Limited is prepared under US
Generally Accepted Accounting Principles (US GAAP),
therefore adjustments are required to convert certain
amounts to comply with AAS.
We determined equity accounting for Alumina Limited's
investment in AWAC to be a key audit matter because of the
magnitude of the investment in associates balance and the
complexity and significance of, and judgement involved, in
preparing the adjustments required by the Group to convert
amounts accounted for under US GAAP to AAS.
Judgement is involved in determining the differences
in the accounting for areas such as the asset retirement
obligation provisions, removal and restoration of certain
refineries, defined pension plans, and the reversal of fixed
asset uplifts included in Alcoa World Alumina Brasil Ltda.
To assess the equity accounting for the Group’s
40% investment in AWAC, we performed a number
of procedures, including the following:
· Assessed the appropriateness of the Group’s equity
accounting method in accordance with AASB 128
Investments in Associates and Joint Ventures;
· Agreed the financial information of Alcoa of Australia
Limited accounted for under AAS to the equity accounting
schedule prepared by the Group;
· Agreed the financial information of AWAC accounted
for under US GAAP to the equity accounting schedule
prepared by the Group;
· Considered adjustments required to convert amounts
accounted for under US GAAP to comply with AAS.
To do this we:
— Tested on a sample basis US GAAP to AAS adjustments
by agreeing the adjustments to supporting schedules
and documentation, considering the appropriateness
of any judgements made; and
— Considered the completeness of the US GAAP
to AAS adjustments
· Reconciled the opening equity accounted investment
balance to the final balance reflected in the financial
report. To do this we:
— Recalculated the share of net loss and other
comprehensive income of AWAC by examining the
schedule prepared by the Group and recalculating
Alumina’s 40% share; and,
— On a sample basis, tested dividends received and
additional investments made through cash calls to the
relevant declaration documents and bank statements.
· We assessed the reasonableness of the disclosures
made in the financial report in accordance with the
requirements of Australian Accounting Standards.
Impairment testing of Alumina Limited’s equity
accounted investment in AWAC
(Refer to note 2)
The carrying value of Alumina’s equity accounted
investment in AWAC is US$1,729.5 million. In accordance
with Australian Accounting Standards, the Group concluded
that indicators of impairment exist as at 31 December 2023
and prepared a calculation to estimate the recoverable
amount of the investment.
To evaluate the Group’s assessment of the recoverable
amount of the AWAC investment we performed
a number of procedures, including the following:
· Evaluated the methodology adopted in the
Group’s discounted cash flow model;
· Assessed the mathematical accuracy of the
discounted cash flow model;
· Assessed the reasonableness of certain historical
assumptions to actual results;
The Group concluded that the recoverable amount of the
investment exceeded the carrying value, and therefore no
impairment charge has been recorded.
· Assessed the appropriateness of certain assumptions
in the model, including consideration of available
external evidence;
The recoverable amount was estimated using the Value in
Use (“VIU”) methodology, which requires the estimation of
future cash flows to prepare a discounted cash flow model.
· With the support of our valuation experts, we assessed
the VIU model and discount rates, amongst other
assumptions; and
The model prepared by the Group contains a number
of significant assumptions including future alumina and
aluminium prices, exchange rates, energy prices, other input
prices and discount rate. Changes in these assumptions
can have a significant impact on the headroom available
in the impairment assessment.
The assessment was considered to be a key audit matter
because of the level of judgement applied by the Group
in the estimating the recoverable amount of the investment.
· Evaluated the reasonableness of the disclosures
made in Note 2 (b) of the financial report, including
those regarding methodology and key assumptions
in light of the requirements of the Australian
Accounting Standards.
Alumina LimitedAnnual Report 2023 101
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the annual report for the year ended
31 December 2023, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover
the other information and accordingly we do not
express any form of assurance conclusion thereon
through our opinion on the financial report. We have
issued a separate opinion on the remuneration report.
In connection with our audit of the financial report,
our responsibility is to read the other information 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 on the
other information that we obtained prior to the date
of this auditor’s report, 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 have 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:
https://www.auasb.gov.au/admin/file/content102/c3/
ar1_2020.pdf. This description forms part of our
auditor's report.
Report on the Remuneration Report
Our opinion on the Remuneration Report
We have audited the remuneration report
included in the directors’ report for the year
ended 31 December 2023.
In our opinion, the remuneration report of Alumina
Limited for the year ended 31 December 2023
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.
Amanda Campbell
Partner PricewaterhouseCoopers
Melbourne
26 March 2024
102
Details of shareholdings and shareholders
Listed Securities – 20 February 2024
Alumina Limited has 2,901,681,417 issued fully paid ordinary shares.
RANGE OF UNITS AS OF 20/02/2024
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 over
Rounding
Total
Total holders
Units
% of Issued Capital
18,335
18,028
6,524
8,385
511
8,454,943
45,872,848
49,645,399
226,616,317
2,571,091,910
51,783
2,901,681,417
0.29
1.58
1.71
7.81
88.61
0.00
100.00
Of these, 10,029 shareholders held less than a marketable parcel of $500 worth of shares (472) a total of
2,352,438 shares. In accordance with ASX Business Rules, the last sale price on the Company’s shares on the ASX
on 20 February 2023 ($1.06 per share) was used to determine the number of shares in a marketable parcel.
Rank Name
HSBC CUSTODY NOMINEES (AUST)
CITICORP NOMINEES PTY LTD
Units
% Units
669,761,542
23.08
499,358,815
17.21
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
372,368,445
12.83
CITIC RESOURCES AUSTRALIA PTY LTD
BESTBUY OVERSEAS CO LTD
NATIONAL NOMINEES
BNP PARIBAS NOMINEES PTY LTD
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