In bid to secure cheaper alumina, Press Metal buys 50% of Australia-based company for A$250 mil

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KUALA LUMPUR (Oct 17): Press Metal Aluminium Holdings Bhd is acquiring 50% of an Australian-based company for A$250 million in a bid to secure cheaper alumina, as well as to strengthen its market position in Southeast Asia.

In a bourse filing, Press Metal said the move to buy over half of Japan Alumina Associates (Australia) Pty Ltd (JAA) for A$250 million (RM738.975 million) cash would be effected via its 80%-owned subsidiary Press Metal Bintulu Sdn Bhd (PMBintulu).

In a separate statement, it said JAA holds 10% participation interest in the Worsley Alumina Unincorporated Joint Venture which owns and operates the Worsley Alumina Project — described by Press Metal as “one of the world’s largest, longest life and lowest cost alumina producers.”

Press Metal said the proposed acquisition will provide the group access to 5% of the annual production of the Worsley Alumina Project, amounting to approximately 230,000 tonnes of alumina, a primary raw material for smelting aluminium. This would allow Press Metal to effectively hedge the supply of alumina, and also to gain additional technical know-how in the alumina refinery business.

The asset sale agreement entered into today between PMBintulu with ITOUCHU Minerals & Energy of Australia Pty Ltd (IMEA) and  ITOUCHU Corporation (ITOUCHU) — the holding company of IMEA – for 50% of JAA entails 16.19 million of Class C shares and 17.97 million of Class C redeemable preference shares of JAA.

JAA is an investment holding company. The remaining 90% of the Worsley Alumina Unincorporated Joint Venture is held by South32 Aluminium (RAA) Pty Ltd (56%), South32 Aluminium (Worsley) Pty Ltd (30%), and Sojitz Alumina Pty Ltd (4%).  

Press Metal said the proposed acquisition will be fully funded via external bank borrowings, and is expected to be completed in the first quarter of 2019. It is not expected to have any material impact on the net assets, gearing and earnings of the company for the financial year ending Dec 31, 2018.

Despite the global economy remaining sluggish with low growth expectations from both advanced and emerging market economies, it is cautiously optimistic of its performance for the financial year ending Dec 31, 2019 given the potential synergistic benefits that will be derived from the proposed acquisition.  

“The use of aluminium per capita will continue to increase and is expected to be at a healthy rate due to the demand in South East Asia and in developing countries such as China and India,” it said.

Press Metal rose five sen or 1.05% to close at RM4.83 today, for a market capitalisation of RM18.82 billion. Some 1.333 million shares were traded.