Bauxite Interests

 

Aluminum is one of the most plentiful elements in the earth’s crust and is produced primarily from bauxite, an ore containing aluminum in the form of aluminum oxide, commonly referred to as alumina. Aluminum is made by extracting alumina from bauxite and then removing oxygen from the alumina. Alcoa processes most of the bauxite that it mines into alumina. The Company obtains bauxite from its own resources and from those belonging to the AWAC enterprise, located in the countries listed in the table below, as well as pursuant to both long-term and short-term contracts and mining leases. In 2012, Alcoa consumed 45 million metric tons (mt) of bauxite from AWAC and its own resources, 7.1 million mt from related third parties and 1.1 million mt from unrelated third parties. Tons of bauxite are reported as bone dry metric tons (bdmt) unless otherwise stated. See the glossary of bauxite mining related terms at the end of this section.

 

The Company has access to large bauxite deposit areas with mining rights that extend in most cases more than 20 years from today. For purposes of evaluating the amount of bauxite that will be available to supply as feedstock to its refineries, the Company considers both estimates of bauxite resources as well as calculated bauxite reserves. Bauxite resources represent deposits for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence based on the amount of exploration sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Bauxite reserves represent the economically mineable part of resource deposits, and include diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out to define the reserves, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Alcoa employs a conventional approach (including additional drilling with successive tightening of the drill grid) with customized techniques to define and characterize its various bauxite deposit types allowing Alcoa to confidently establish the extent of its bauxite resources and their ultimate conversion to reserves.

 

The table below only includes the amount of proven and probable reserves controlled by the Company. While the level of reserves may appear low in relation to annual production levels, they are consistent with historical levels of reserves for our mining locations. Given the Company’s extensive bauxite resources, the abundant supply of bauxite globally and the length of the Company’s rights to bauxite, it is not cost-effective to invest the significant resources necessary to establish bauxite reserves that reflect the total size of the bauxite resources available to the Company. Rather, bauxite resources are upgraded annually to reserves as needed by the location. Detailed assessments are progressively undertaken within a proposed mining area and mine activity is then planned to achieve a uniform quality in the supply of blended feedstock to the relevant refinery. Alcoa believes its present sources of bauxite on a global basis are sufficient to meet the forecasted requirements of its alumina refining operations for the foreseeable future.

 

Bauxite Resource Development Guidelines 

 

Alcoa has developed best practice guidelines for bauxite reserve and resource classification at its operating bauxite mines. Alcoa’s reserves are declared in accordance with Alcoa’s internal guidelines as administered by the Alcoa Ore Reserve Committee (AORC). The reported ore reserves set forth in the table below are those that Alcoa estimates could be extracted economically with current technology and in current market conditions. Alcoa does not use a price for bauxite, alumina, or aluminum to determine its bauxite reserves. The primary criteria for determining bauxite reserves are the feed specifications required by the customer alumina refinery. In addition to these specifications, a number of modifying factors have been applied to differentiate bauxite reserves from other mineralized material. Alcoa mining locations have annual in-fill drilling programs designed to progressively upgrade the reserve classification of their bauxite.

 

Alcoa Active Bauxite Interests1

As reported December 31, 2012

Country Project Owners' Mining Rights (% Entitlement) Expiration Date of Mining Rights Probable Reserves (million bdmt) Proven Reserves (million bdmt) Available Alumina Content (%) AvAl2O3 Reactive Silica Content (%) RxSiO2 2012 Annual Production (million bdmt)
Australia Darling Range Mines ML1SA Alcoa of Australia Limited (AofA)2 (100%) 2045 34.7 109.0 32.9 0.94 31.8
Brazil Poços de Caldas Alcoa Alumínio S.A. (Alumínio)3 (100%) 20204 0.5 1.1 39.5 4.3 0.8
Juruti4,5
RN102, RN103, RN104
Alcoa World Alumina Brasil Ltda. (AWA Brasil)2 (100%) 21004 25.8 13.4 47.4 3.4 3.8
Jamaica Harmon’s Valley
South Manchester
North Manchester
Alcoa Minerals of Jamaica, L.L.C.2 (55%)
Clarendon Alumina Production Ltd.6 (45%)
2031 2.6 0.9 42.1 1.9 1.8
Suriname Coermotibo Suriname Aluminum Company, L.L.C. (Suralco)2 (55%)
N.V. Alcoa Minerals of Suriname (AMS)7 (45%)
20338 - 2.6 39.1 4.9 1.4
Onverdacht Suralco (55%)
AMS7 (45%)
20338 3.1 0.7 51.8 4.5 1.6

Equity interests:
Brazil Trombetas Mineração Rio do Norte S.A. (MRN)9 (100%) 20464 4.0 9.5 50.7 4.2 2.8
Guinea Boké Compagnie des Bauxites de Guinée (CBG)10 (100%) 203811 29.0 29.9 TAl2O312 50.2 TSiO212 1.7 3.2
Kingdom of Saudi Arabia Al Ba’itha Ma’aden Bauxite & Alumina Company (100%)13 2037 33.9 21.3 TAA14 47.2 TSiO214 9.8 Production to begin 2014

1 This table shows only the AWAC and/or Alcoa share (proportion) of reserve and annual production tonnage.
2 This entity is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited.
3 Alumínio is owned 100% by Alcoa.
4 Brazilian mineral legislation does not establish the duration of mining concessions. The concession remains in force until the exhaustion of the deposit. The Company estimates that (i) the concessions at Poços de Caldas will last at least until 2020, (ii) the concessions at Trombetas will last until 2046 and (iii) the concessions at Juruti will last until 2100. Depending, however, on actual and future needs, the rate at which the deposits are exploited and government approval is obtained, the concessions may be extended to (or expire at) a later (or an earlier) date.
5 In September 2009, development of a new bauxite mine was completed in Juruti, state of Pará in northern Brazil. The mine is fully operational and produced 3.8 million bdmt in 2012.
6 Clarendon Alumina Production Ltd. is wholly-owned by the Government of Jamaica.
7 Alcoa World Alumina LLC (AWA LLC) owns 100% of N.V. Alcoa Minerals of Suriname (AMS). AWA LLC is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited.
8 Mining rights expired for the Caramacca area. The mining rights in the Onverdacht and Coermotibo areas where Suralco has active mines extend until 2033. Bauxite within these areas will likely be exhausted in the next few years. Alcoa is actively exploring and evaluating alternative sources of bauxite in Suriname. A feasibility study relating to the development of a mine at the Nassau Plateau is in progress.
9 Alumínio holds an 8.58% total interest, AWA Brasil (formerly Abalco S.A., which merged with Alcoa World Alumina Brasil Ltda. in December 2008) holds a 4.62% total interest and AWA LLC holds a 5% total interest in MRN. MRN is jointly owned with affiliates of Rio Tinto Alcan Inc., Companhia Brasileira de Alumínio, Companhia Vale do Rio Doce, BHP Billiton Plc (BHP Billiton) and Norsk Hydro. Alumínio, AWA Brasil, and AWA LLC purchase bauxite from MRN under long-term supply contracts.
10 AWA LLC owns a 45% interest in Halco (Mining), Inc. Halco owns 100% of Boké Investment Company, a Delaware company, which owns 51% of CBG. The Guinean Government owns 49% of CBG, which has the exclusive right through 2038 to develop and mine bauxite in certain areas within a 10,000 square-mile concession in northwestern Guinea.
11 AWA LLC has a bauxite purchase contract with CBG that expires in 2029. Before that expiration date, AWA LLC expects to negotiate an extension of the contract as CBG will have concession rights until 2038. The CBG concession can be renewed beyond 2038 by agreement of the Government of Guinea and CBG should more time be required to commercialize the remaining economic bauxite within the concession.
12 Guinea—Boké: CBG prices bauxite and plans the mine based on the bauxite qualities of total alumina (TAl2O3) and total silica (TSiO2).
13 Ma’aden Bauxite & Alumina Company is a joint venture owned by Saudi Arabian Mining Company (Ma’aden) (74.9%) and AWA Saudi Limited (25.1%). AWA Saudi Limited is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited.
14 Kingdom of Saudi Arabia—Al Ba’itha: Bauxite reserves and mine plans are based on the bauxite qualities of total available alumina (TAA) and total silica (TSiO2).

 

Qualifying statements relating to the table above:

 

Australia—Darling Range Mines: Huntly and Willowdale are the two active mines in the Darling Range of Western Australia. The mineral lease issued by the State of Western Australia to Alcoa is known as ML1SA and its term extends to 2045. The lease can be renewed beyond 2045. The declared reserves have been estimated to the end of December 2012. The amount of reserves reflect the total AWAC share. Additional resources are routinely upgraded by additional exploration and development drilling to reserve status. The Huntly and Willowdale mines supply bauxite to three local AWAC alumina refineries.

 

Brazil—Poços de Caldas: Declared reserves are as of the end of October 2012. Tonnage is total Alcoa share. Additional resources are being upgraded to reserves as needed.

 

Brazil—Juruti RN102, RN103, RN104: Declared reserves are as of November 1, 2012. Declared reserves are total AWAC share. Declared reserve tonnages and the annual production tonnage (estimate to the end of 2012) are washed product tonnages. The Juruti mine’s operating license is periodically renewed and the next renewal is in 2014.

 

Jamaica—Jamalco: Declared reserves are as of October 2012. The declared reserve and annual production tonnages are AWAC share only (55%). Declared reserves are in the following areas: Harmon’s Valley, South Manchester, North Manchester and Porus/Victoria. Current ore mining is in Harmon’s Valley and South Manchester with a small amount of ore from a test stockpile in North Manchester. The location has scheduled probable reserves from North Manchester and Porus/Victoria within the 2013-2016 period. Additional resources are in the process of being upgraded to reserves.

 

Suriname—Suralco—Caramacca: Caramacca has been removed from the reserves due to the expiration of the mining permits for this area. Some ore remains at Caramacca and the permit is awaiting renewal by the Government of Suriname so that the last ore can be recovered.

 

Suriname—Suralco—Coermotibo and Onverdacht: Declared reserves are as of October 1, 2012. AWAC owns 100%. Additional resources are being evaluated for upgrading to reserves.

 

Kingdom of Saudi Arabia—Al Ba’itha: Declared reserves are as of March 2011 and are for the South Zone of the Az Zabirah Bauxite Deposit. The reserve tonnage in this declaration is AWAC share only (25.1%). The Al Ba’itha Mine is due to begin production during 2014.

 

Brazil—Trombetas-MRN: Declared reserves are as of May 31, 2012. Declared and annual production tonnages reflect the total for Aluminío and AWAC shares (18.2%). Declared tonnages are washed product tonnages.

 

Guinea—Boké-CBG: Declared reserves are as of January 1, 2012. The declared reserves are based on export quality bauxite reserves. The AWAC share of CBG equates to 22.95%. Declared reserve tonnages are based on the AWAC share of CBG’s reserves. Annual production tonnage reported is based on AWAC’s 22.95% share. Declared reserves quality is reported based on total alumina (TAl2O3) and total silica (TSiO2) because CBG export bauxite is sold on this basis. Additional resources are being routinely drilled and modeled to upgrade to reserves as needed.