Chairman and CEO’s overview

Chairman and CEO’s overview

The term ‘sustainability’ means different things to different people. In the context of Alumina Limited’s forty per cent interest in the AWAC enterprise, sustainability means operating the business in a manner that ensures;

• the economic viability of the business
• sensible management, protection and rehabilitation of the environment in which the business operates
• the safety and well-being of AWAC’s employees, and
• contributing to improved socio-economic position of the communities in which AWAC operates.

AWAC’s sustainability strategies and practices are developed and implemented by the business manager/operator, Alcoa. Alcoa has established a significant worldwide leadership in sustainability practices that has resulted in their continued inclusion in the Dow Jones Sustainability Index for 12 consecutive years.

AWAC is formally governed by the Strategic Council, a body comprising of five members, three appointed representatives of Alcoa and two members from Alumina Limited, consistent with each company’s equity ownership in the enterprise. There is a shared desire and goal of Alumina Limited and Alcoa to operate the business in a responsible and sustainable manner. While actual sustainability planning and practices are developed and implemented by Alcoa, they are reflective of Alumina’s Sustainability Policy. Through participation on the Strategic Council and representation on the Boards of AWAC operating companies, Alumina Limited monitors the sustainability strategies and the progress towards achieving sustainability performance targets.

AWAC’s sustainability targets (that align with Alcoa’s global goals) are set forward to 2020 and 2030 from a base year of 2005. This forward goal setting allows for the development of intermediate or short-term goals that ultimately contribute to meeting the longer-term objective. A structured approach of business ‘roadmaps’, directs planning and action towards achieving the longer-term goals. Business ‘scorecards’ focus on shorter-term objectives and are integrated into business strategy ensuring that those sustainability objectives are integral to achieving business goals.

In 2013 AWAC improved cash flow from operations (US$632.9 million 2012: US$241.9 million) due to improved operating performance and working capital management despite higher expenditure relating to mining and maintenance. Dividend and distributions from AWAC to Alumina Limited increased from US$95.1 in 2012 to US$107.3 in 2013. The improvement occurred in a challenging market and economic environment of continued low prices for AWAC’s products. Alumina Limited registered a profit of US$0.5 million compared to a US$55.6 million loss. While the result is not ideal, it does reflect improvements in the business that is resulting in positive economic benefit.

Energy efficiency is a crucial factor sustainability factor, important for reducing the cash cost of production and also contributing to a reduction in Greenhouse Gas (GHG) emission. In 2013 AWAC continued with the transition of the San Ciprian alumina refinery in Spain from fuel oil to more efficient and cleaner natural gas. This project will be completed in 2015. Attention has also been directed at productivity gains that have resulted in improved energy efficiency. Operationally in 2013, AWAC produced 15.8 million tonnes of alumina, a 1.6% increase over 2012 however direct energy intensity per tonne of alumina decreased by 0.3% due to improved production efficiencies. AWAC’s aluminium smelters also produced a 0.86% improvement in direct energy intensity driven by efficiency advancements.

Positively, absolute GHG emissions for AWAC dropped by 1.58% in 2013 despite a 1.61% increase in the production of alumina and a 1.19% decrease in aluminium produced. GHG intensity, measured by per unit of production, decreased in 2013 by 1.25% for alumina produced by AWAC. Those improvements validate the productivity changes that have resulted in improved efficiency and lower emissions in terms of both absolute and emissions per unit of production.

Continued attention to water management processes resulted in a decline in total water usage for AWAC in 2013. Water withdrawals declined by approximately 1,127,000 kilolitres or, expressed in percentage terms, 3% mainly attributable to water conservation measures at the Juruti bauxite mine. Measured on a per-tonne of alumina production basis, water intensity in 2013 of 1.81 kilolitres was marginally higher than 1.80 kilolitres in 2012.

Employee well-being is an absolute priority for Alumina Limited and the AWAC enterprise. Importantly, in 2013 the two main safety metrics for AWAC recorded improvements: Lost Workday (LWD) Incident Rate declined 6.4% to 0.248 and Total Recordable Incident (TRI) Rate declined 6.2% to 1.36.

In waste management AWAC recorded gains in the management of bauxite residue, specifically as measured by the square metres of land required per thousand metric tons of alumina produced. In 2013, 57 square metres was required an improvement of 3.4% year-on-year and is edging closer to achieving the 2020 target of 55 square metres.

AWAC business strategies are developed with the global outlook in mind however, each of AWAC’s facilities operates at a community level. Communities in diverse areas such as Juruti Brazil located in the Amazonian rainforest, in Jamaica and Suriname, to communities in the southwest of Western Australia and through to the desert region of Saudi Arabia where a joint venture bauxite mine and alumina refinery is being developed with Ma’aden . Each community supports a different culture, people with different needs and a physical environment that requires specific environmental management. AWAC’s ongoing right to operate is dependent on interacting closely with people, organisations and relevant government bodies in the community to ensure that issues and concerns are understood and can be addressed. The Employees and Community section of this report lists some key issues raised at a community level and the response given.

To operate in sustainable manner requires dynamic thinking supported by appropriate action because circumstances, issues and needs change and evolve. We believe that within AWAC there are the strategies, structures, processes and purpose to maintain a sustainable business.

Thank you for reading our Sustainability Update, we have tried to provide a transparent and informative report based on the Global Reporting Initiative (GRI) template.

We would appreciate your comments and thoughts on Alumina Limited’s and AWAC’s sustainability approach and invite you to provide any feedback that you may have to improve our sustainability reporting.

 

 

 

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Peter Wasow

Chief Executive Officer

 

 

 

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John Pizzey

Chairman