May Aluminum Price Forecast: Examining the 2014 Alcoa, Century Aluminum Deal

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Shiny aluminum ingots with a crane in the background while a plane is flying over

Now that several years have passed since Alcoa sold its stake in the Mt. Holly smelter to Century Aluminum, it’s prudent to look back at the deal and assess who really came out on the winning end.

According to a series published on Yahoo News by Mark O’Hara of Market Realist, the selling price between the two companies was not fixed at the time of sale and was dependent on Midwest aluminum prices. While the base price was $67 million, the final transaction price could fall anywhere between $55 million and $90 million.

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Wrote O’Hara: “As aluminum prices have been on a losing streak since the deal was announced, Century Aluminum recognized $13 million as an earn-out from the transaction during 1Q16. This helped Century Aluminum post positive free cash flows in the quarter.”

While falling aluminum prices over the long term have helped Century Aluminum in this deal, the Mt. Holly plant has faced energy supply issues for the past year, offsetting the come down in price over that same time.

Still, despite the energy supply conundrum, Century Aluminum maintains the Mt. Holly smelter remains the most efficient in the United States. As far as Alcoa is concerned, its investors should be closely monitoring the company’s split as it develops this year.

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