Chairman and CEO's overview
Chairman and CEO’s letter
Welcome to the Alumina Limited’s Sustainability Update for 2016.
Business Sustainabiliy and Strategy
2016 saw the continued transformation of the asset portfolio of the AWAC enterprise. The transformation which commenced in 2014 resulted from a strategic decision to restructure and reposition the asset portfolio of AWAC with the goal to improve the business fundamentals of the joint venture and strengthen the businesses competitive position. This was about creating a more sustainable business by transitioning to a lower global cash cost position through selling, closing or curtailing of higher cost production. Building a sustainable business often requires making decisions that are very difficult because they impact the lives of employees, their families, contractors, suppliers and the social and economic fabric of the communities in which those assets operated.
Since 2014 decisions were made to close the Point Henry aluminium smelter at Geelong Victoria Australia, sell the Jamalco alumina refinery in Jamaica, close the Anglesea Power Station and coal mine in Victoria, close the Suralco alumina refinery and associated mines in Suriname and fully curtail production at the Point Comfort alumina refinery in Texas. There have also been substantial improvements made to the Kwinana and San Ciprian operations
Alumina Limited is involved in a higher level strategic role, assisting Alcoa on examining industry trends, future opportunities and direction. As a result of strategic collaboration, Alcoa has positioned AWAC in furthering business opportunities by actively participating in the expanding third party bauxite market after it formed a Mining and Bauxite business unit in January 2015. In 2015 AWAC sold 2.0 million bone dry tonnes (BDT) of bauxite to third parties and further lifted sales to 6.3 million BDT in 2016 with increased sales planned for 2017.
The restructuring measures were necessary to ensure the competitiveness of the AWAC business. Together with the implementation of cost efficiencies over the last three years, the cash production cost for producing a tonne of alumina has reduced by $67 per tonne.
Also in 2016, the joint venture agreements between Alumina Limited and the newly formed Alcoa Corporation were revised to align more closely the partners’ interest in AWAC, while establishing greater strategic flexibility and autonomy for both partners.
Alcoa as manager/operator of AWAC and joint venture partner with Alumina Limited is sensitive to the social and economic impacts of the restructuring. Employees affected by the restructuring were offered support leading up to and post restructuring events. Support was also offered at local community level, for example at Geelong in Australia, funds were allocated by Alcoa to that region’s Innovation and Investment Fund to support job creation for employees affected by the closure of the Point Henry aluminium smelter and the Anglesea Power Station and coal mine.
In relation to the physical environment, the curtailment, closure and sales, together with process efficiency gains have contributed to a reduction of AWAC’s energy and Greenhouse Gas (GHG) emission in 2016 in comparison to 2015 outcomes. AWAC’s absolute energy usage reduced by 14.5 per cent and its GHG emissions reduced by 11.8 per cent. Importantly the GHG intensity per tonne of product has declined by 14 per cent for smelting and 15 per cent for refining since 2005.
Rehabilitation of mined areas has been a strong commitment and successful outcome of the business. Mining is considered only a temporary use of the land. The focus of rehabilitation effort is planned and structured in consultation with government and local communities to ensure local needs are met where practical. Alcoa have been leading the way in rehabilitation techniques for many years with the Western Australian operations receiving international recognition for their outcomes. More recently at the Juruti mine in Brazil the innovative nucleation technique has been applied with excellent results in rapidly re-establishing mined areas to their natural state.
AWAC continues to strive towards meeting strategic sustainability targets that are intrinsically woven into the business strategy and processes.
Technology and process efficiency
Alcoa has introduced new technologies to improve process efficiencies with the AWAC operations. The implementation of a bauxite residue filtration system at AWAC’s Kwinana alumina refinery in Western Australia will reduce the footprint of the residue storage area by deferring the need to construct another 30 hectare storage area for at least 20 years compared to every five years previously. The same technology also reduces freshwater use per annum by 1.2 gigalitres assisting the business meeting sustainability goals of reducing average freshwater intensity. Alcoa will examine rolling this technology out to other AWAC refineries.
In the key area of safety, regrettably, a contractor was fatally injured at AWAC's Alumar alumina refinery in February 2016. A thorough review of procedures and the cause of the accident was conducted and engineering practices were revised and training conducted and verified. Also, the Lost Workday Rate increased marginally in 2016 the Days Away, Restricted and Transfer Rate decline. In 2016, Alcoa as manager/operator of AWAC, revised its safety strategy to focus on two key areas; i) preventing and mitigating fatalities and life –altering injuries and, ii) implementing more transparent, accessible and inclusive reporting.
Alumina Limited supports the ongoing efforts of Alcoa who is responsible for sustainability goal setting and the systems and diligence in striving to achieve those goals to provide a sustainable business and outcomes for AWAC’s stakeholders.
For further information on these topics and other matters of sustainability, please refer to the detailed content of the 2016 Sustainability Update. We also welcome your feedback regarding the content and detail of information provided.
Chief Executive Officer