Weekly Metals And Mining Notes: Alcoa, Freeport McMoran And Vale

December 26th, 2014 by Trefis Team
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Alcoa

The metals and mining space witnessed a flurry of activity this week. Alcoa announced the commencement of production from its alumina refinery in Saudi Arabia. Freeport-McMoran announced the completion of a successful production test at an onshore oil and gas discovery in Southern Louisiana. Vale announced the completion of a previously announced merger of two of its subsidiaries into the parent company in order to simplify its corporate structure. Here are the major events of the week for companies that Trefis covers in the metals and mining space.

Alcoa

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Alcoa (NYSE:AA) announced the commencement of production from its alumina refinery in Saudi Arabia. The refinery is a part of Alcoa’s aluminum complex in Saudi Arabia, which was set up by a joint venture comprising of Alcoa and Saudi Arabian Mining Company (Ma’aden). [1] The alumina refinery has a capacity of 1.8 million tons per year. Alcoa’s consolidated alumina refining capacity stood at 18.1 million tons per year at the end of 2013. [2]  Alcoa and Ma’aden’s facilities in Saudi Arabia are the lowest cost aluminum complex in the world. [1] This complex is a major part of Alcoa’s plans to reduce the average costs of production of its commodity businesses.

We have a $16 price estimate for Alcoa, which is nearly at par with the market price. We estimate revenues of $24.2 billion in 2014 for the company and an EPS of $0.89, compared to a consensus estimate of $0.84.

Freeport-McMoran Inc.

Freeport-McMoran Inc. announced the successful completion of a production test at its oil and gas division’s Highlander discovery, which is located onshore in the Inboard Lower Tertiary/Cretaceous Trend in Southern Louisiana. [3]The company will begin commercial production from the discovery in 2015.

Freeport-McMoran is investing heavily for exploration and development activities of its oil and gas assets. The company plans to invest close to $11 billion for this purpose between 2014 and 2016. [4] This will boost the company’s oil and gas output from 56 million barrels of oil equivalent (MMBOE) in 2014 to 80 MMBOE in 2016. [5]

Vale

Vale (NYSE:VALE) announced that its has completed the merger of two of its subsidiaries into the parent company. [6]  The company had announced plans to merge its wholly-owned subsidiaries, Sociedade de Mineração Constelação de Apolo S.A. and Vale Mina do Azul S.A., into the parent company last month. [7] This action was taken by the company with the intention of simplifying its corporate structure and facilitating its operations.

We have a $10 price estimate for Vale, around 25% higher than the market price. We estimate revenues of around $42 billion for the company in 2014.

 

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Notes:
  1. Refinery at Ma’aden-Alcoa Joint Venture Produces First Alumina from Saudi Bauxite, Alcoa News Release [↩] [↩]
  2. Alcoa’s 2013 10-K, SEC [↩]
  3. Freeport-McMoRanAnnounces Successful Production Test at Highlander Discovery Onshore in South Louisiana, Freeport-McMoran News Release [↩]
  4. Freeport-McMoran’s Q3 2014 Earnings Presentation, Freeport-McMoran Website [↩]
  5. Freeport-McMoran’s Q3 2014 Earnings Presentation, Freeport-McMoran Website [↩]
  6. Vale about consolidation of two subsidiaries, Vale News Release [↩]
  7. Vale approves consolidation of two subsidiaries, Vale News Release [↩]