Filed by Alcoa Corporation
(Commission File No. 1-37816)
Pursuant to Rule 425 of the Securities
Act of 1933
Subject Company: South32 Limited
(Commission File No. 1-37816)
The following is a transcript of the investor
call held by Alcoa Corporation (“Alcoa”) on June 30, 2026 in connection with the proposed transaction between Alcoa
and South32 Limited. A replay of the investor call is available here: https://services.choruscall.com/mediaframe/webcast.html?webcastid=laYoNqUv:
Alcoa Corporation
Investor Call
Tuesday, June 30, 2026, 7:00 PM ET
CORPORATE PARTICIPANTS
William Oplinger – President, CEO & Director
Molly Beerman - Executive VP & CFO
Louis Langlois – Senior
VP of Treasury & Capital Markets
PRESENTATION
Operator
Good afternoon, and welcome to Alcoa Corporation's
conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing
the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press
star then one on your phone. To withdraw your question, please press star then two. Please note, this event is being recorded.
I would now like to turn the conference over to
Louis Langlois, Senior Vice President of Treasury and Capital Markets. Please go ahead.
Louis Langlois
Thank you for joining us on short notice to discuss
Alcoa's announcement to acquire South32 Limited's interest in bauxite, alumina and aluminum assets. I'm joined today by William Oplinger,
Alcoa Corporation President and Chief Executive Officer; and Molly Beerman, Executive Vice President and Chief Financial Officer. We will
take your questions after comments by Bill.
As a reminder, today's discussion and presentation
will contain forward-looking statements relating to the transaction and future events and expectations that are subject to various assumptions
and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation
and in our SEC filings. Any reference in our discussion today to Alcoa's EBITDA means adjusted EBITDA. Please see the appendix of this
presentation for disclaimers and additional information including related to the presentation of certain financial information. Finally,
a press release regarding today's announcement and the reference slide presentation are available on the Investor Relations section of
our website.
Now I'd like to turn over the call to Bill.
William Oplinger
Thanks, Louis, and welcome. Today is an exciting
day for Alcoa. We are announcing a transaction that is a defining moment for Alcoa and our shareholders as it strengthens our leadership
as a pure-play upstream aluminum company. We have entered into a definitive agreement to acquire South32's interests in a portfolio of
high-quality bauxite, alumina and aluminum assets in Australia, Brazil and South Africa for upfront consideration of $4.1 billion.
I'll start by taking you through an overview of
the transaction and its strategic and financial benefits. Molly and I will take questions at the end of the discussion. This is exactly
the type of opportunity we've been preparing for, one that strengthens our portfolio, enhances our competitiveness and creates long-term
value for shareholders by unlocking synergies that are not available otherwise. The transaction includes South32's interest in the Boddington
bauxite mine, Worsley alumina refinery, Hillside aluminum smelter, the Alumar refinery and smelter and MRN bauxite mine.
Together, these are world-class operations that
complement our existing footprint and enhance our ability to generate value through the cycle. They have strong operating histories, attractive
cost positions and limited integration risk. This transaction does not include the Mozal smelter in Mozambique, which was previously placed
under care and maintenance by South32.
The consideration consists of $3.1 billion of cash
and 17 million newly issued Alcoa shares, or approximately 6% of Alcoa's outstanding shares post-issuance. This represents total equity
value of $4.1 billion. Including assumed lease-related liabilities, the implied enterprise value is approximately $4.7 billion. The transaction
also includes a contingent value right of up to $750 million tied to future market conditions.
We agreed to structure the transaction on a lockbox
basis to ensure price certainty, avoid post-close adjustments and enable a clean transition. While more frequently used in transactions
outside the U.S., the lockbox structure allows Alcoa to benefit from the acquired assets cash generation from March 31st, 2026. We will
have the risk of market price movements, but we also have the benefit of a streamlined path to integration and combined value realization.
We expect this transaction to generate approximately $900 million of net present value synergies, supported by portfolio optimization,
procurement savings and our proven operating capabilities. We also expect the transaction to be immediately accretive to earnings per
share and free cash flow after closing.
Turning to financing, we are taking a disciplined
approach that is consistent with how we've managed the balance sheet over the last several years. We have secured bridge financing commitments
but fully expect to replace that bridge with a combination of balance sheet cash and permanent debt financing before closing. Regarding
the equity component, upon closing, South32 will distribute at least half of the Alcoa shares provided as consideration to its shareholders
via an in-specie distribution. South32 is able to sell the remaining shares in an orderly manner without a lockup period.
Maintaining a strong balance sheet remains a priority,
and we will continue to apply the same capital allocation discipline that investors have come to expect from Alcoa. Finally, on timing,
the parties have signed transaction documentation and there are no financing conditions remaining. We will pursue required various regulatory
approvals, including in Australia, Brazil, the European Union, South Africa and the United States. The transaction is subject to South32
shareholders' approval, which is expected later this year. The approvals process is anticipated to take up to 12 months from today's announcement,
enabling the transaction to close during the first half of 2027.
Stepping back, the transaction brings together
three elements that matter most to create shareholder value, strategic fit, actionable synergies and stronger financial performance. First,
we're bringing together highly complementary assets that are mostly in close geographic proximity to our existing portfolio. That combination
creates opportunities to improve performance and enhance our cost competitiveness and strengthen the resilience of our supply chain. It
also enables us to better serve customers by leveraging a larger and more integrated operating footprint.
Second, this transaction unlocks significant value
through synergies. We have so far identified approximately $900 million of net present value synergies, including roughly $50 million
of run rate cost savings that we expect to realize within the first year following closing. These synergies are driven by real industrial
logic with opportunities to leverage the collective strength of the Australian operations, improve the Brazilian assets through sourcing
optimization and add the benefits of a large scale, stable smelter in South Africa with proven operating performance. Importantly, these
synergies are highly actionable and are based on areas where Alcoa has a demonstrated track record of execution.
Third, the transaction delivers compelling financial
results. We expect the acquisition to be accretive to our earnings per share and cash flow metrics immediately after close with additional
upside as synergies are captured over time. These assets enhance our ability to generate stronger cash flow through the cycle and further
improve our position on the global alumina and aluminum cost curves. As we've consistently said, our strategy is not simply to get bigger;
it is to build a stronger, more competitive Alcoa.
This transaction advances that objective by increasing
our exposure to high-quality, low-cost assets, improving the quality of our earnings and cash flow and strengthening our ability to perform
through the cycle. When you bring together the strategic fit, the actionable synergy opportunity and the compelling financial benefits,
the conclusion is clear. This acquisition strengthens Alcoa's position as the leading pure-play upstream aluminum company, enhances our
ability to capture long-term demand growth and reinforces Alcoa's position as the aluminum investment of choice for investors seeking
exposure to a high-quality globally competitive upstream aluminum portfolio.
Turning to the portfolio fit, we're acquiring high-quality
assets in regions where we already have deep operating expertise, established relationships, a proven track record of execution, as well
as expanding our footprint in Africa. In Australia, the Boddington mine and Worsley refineries sit alongside our existing mining and refining
system, creating opportunities to further strengthen one of the world's premier alumina regions.
In Brazil, we're increasing our ownership in assets
we already know well, which gives us a clear path to operational and commercial optimization. And in South Africa, Hillside complements
our existing smelting portfolio and expands our participation in the aluminum value chain. By integrating world-class operations and talent
with our operating model, technical and commercial capabilities, we see meaningful opportunities to leverage our combined expertise to
improve performance and sustainably lower our cost base.
These competitive assets will strengthen Alcoa's
portfolio. Starting with Worsley, a cornerstone of the transaction; it includes the Boddington bauxite mine in the Worsley refinery providing
full integrated mining and refining. This was the largest EBITDA contributor in 2025 of the acquired assets and represents a significant
source of long-term value in the portfolio. In Brazil, the acquisition includes additional interest in the Alumar refinery and smelter,
which we already operate and will result in Alcoa's 100% ownership in the Alumar smelter.
South32's interest in both assets generated approximately
$1 billion of revenue and $100 million of EBITDA in 2025. The associated interest in MRN supplies bauxite into the Alumar refinery. This
is largely a consolidation of ownership and optimization of an existing system with limited operating risk. The acquired interest in MRN
is subject to a right of first refusal of other shareholders, which if exercised, will result in Alcoa not acquiring that interest in
MRN. We have considered and planned management of bauxite supply and related operational manners under both the scenario where we acquire
this interest in MRN and where we do not acquire this interest in MRN.
With the Hillside smelter, we are adding meaningful
volume and cash flow generation. In 2025, Hillside generated approximately $2 billion of revenue and $200 million of EBITDA and, in the
current pricing environment, is delivering strong cash generation. This asset adds scale to our smelting portfolio in a way that is expected
to be cash flow accretive immediately. Hillside does introduce a new geography for Alcoa, but from a technical standpoint, it uses the
same AP30 smelting technology that we have operated for decades at two of our smelters.
Across the full portfolio, production at these
assets has been stable and predictable over the past five years, which we view as an important indicator of operational reliability and
downside resilience. Simply put, these are high-quality, well-understood assets with strong operating histories, and we see a clear path
to integration, all of which support our confidence in the value creation potential of this transaction. This deal is attractive today
and it becomes even more compelling as we capture the synergies. We expect to begin realizing benefits quickly, targeting approximately
$50 million of annual run rate cost savings within the first 12 months after closing through procurement, logistics and commercial optimization.
In addition to the benefits of adding scale, we
bring together the best of both organizations. By combining Alcoa's high-performance culture and commercial discipline with a deep asset
knowledge, local expertise and strong operating cultures of the South32 teams, we have an opportunity to build a stronger, more capable
company for the long term. There is also meaningful value to be realized from applying the best of both concept across the portfolio.
By leveraging best practices and technology and adding South32's expertise to our centers of excellence, we expect to improve productivity,
lower costs and enhance operational stability.
The largest long-term opportunity comes from optimizing
the Western Australia asset base. Combining mine planning and development creates opportunities to access higher-quality ore, improve
efficiency and optimize capital deployment over many years. These synergies are actionable, beginning shortly after closing and building
over time. They reinforce our conviction that this transaction can deliver substantial shareholder value. Over the coming months, we will
work diligently and respectfully to prepare for integration. We recognize the strength of the South32 workforce and believe that our combined
capabilities, shared values and performance culture position us to build an even stronger Alcoa and create long-term value for employees,
communities, customers and stockholders alike.
The acquired assets bring meaningful scale. On
a calendar year 2025 pro forma basis, EBITDA would have been higher by approximately 45%, revenue by 28%, alumina production by more than
50% and aluminum production by nearly 40%. That scale strengthens our market position while improving the overall quality of our portfolio.
Equally important, we're adding high-quality, low-cost assets that improve our position on both the alumina and aluminum cost curves,
which translates into greater resilience and stronger free cash flow generation through the cycle. That cash generation gives us flexibility.
It supports our commitment to maintaining a strong balance sheet, provides a clear path for deleveraging after completion of the acquisition
and, ultimately, enhances our ability to create value for shareholders over the long term.
At the agreed consideration, the transaction implies
an enterprise value of approximately $4.7 billion, including assumed liabilities but before the contingent value right, were up to $5.4
billion, assuming the maximum CVR payout. Against 2025 EBITDA of the acquired assets of roughly $900 million. That translates into an
acquisition multiple of approximately 5.2x to 6.1x EBITDA, depending on the ultimate CVR outcome. Importantly, that's before giving credit
for any of the synergy value we've identified.
When we compare that valuation to Alcoa's own trading
history, the transaction is being executed at or below our average through-cycle valuation. As the chart shows, our average enterprise
value to EBITDA multiple over the last five years has been approximately 6.3x, which is above the acquisition multiple we're paying today.
We also structured the transaction so that a portion of the value is contingent on future commodity prices.
The CVR aligns consideration with market outcomes
and allows us to share upside with the seller while protecting value for Alcoa shareholders if commodity prices are lower than expected.
The way we look at it is simple; we are acquiring an evaluation that is attractive relative to both our own trading history and the quality
of the assets we're buying.
To conclude, this is the right transaction for
Alcoa and an important step forward in strengthening our position as the leading pure-play upstream aluminum company. It brings together
high-quality assets, clear industrial logic, actionable synergies and compelling financial benefits. Most importantly, it improves the
quality, scale and resilience of our portfolio and enhances our ability to create long-term value for Alcoa shareholders. We believe this
transaction reinforces Alcoa's position as the investment of choice in aluminum for investors seeking exposure to a high-quality, globally
competitive upstream portfolio.
With that, let's open the floor for questions.
Operator, please begin the Q&A session.
QUESTION AND ANSWER
Operator
We will now begin the question and answer session.
To ask a question, you may press star then one on your phone. If you're using a speakerphone, please pick up your handset before pressing
the keys. To withdraw your question, please press star then two. When called upon, please limit yourself to two questions.
And the first question comes from Alex Hacking
at Citi. Please go ahead.
Alex Hacking
Yeah. Thanks, Bill, and congratulations on the
transaction. You mentioned that you expect the transaction to be cash flow accretive. You mentioned that the Hillside smelter is generating
positive free cash in the current environment. How about the other assets? Thank you.
William Oplinger
Thanks, Alex. Hillside is generating significant
free cash flow currently. The Alumar refinery is our most EBITDA-positive refinery that we have in the system currently. So Alumar is
currently EBITDA-positive. Alumar smelting is EBITDA -- significantly EBITDA-positive under the current scenario. And what am I missing?
Worsley. Worsley, when we look at Worsley's numbers, they're around breakeven at a lower $300, so let's say, a $310, a $315. We believe
they're around breakeven. At a $330, they would be EBITDA-positive.
And Alex, just to be clear, and if I could add
on to it, when we step back and look at this transaction, we think that we are acquiring fantastic, long-term assets at a really reasonable
price. So if you do the math, there's a variety of different ways to cut it, but we're acquiring smelting capacity at about $1,850 per
ton. We're acquiring refining capacity at $600 per ton. I would tell you, both of those numbers are below what the Chinese build in Indonesia
at today.
Western world smelting capacity, new capacity,
probably goes for $7,000 to $8,000 a ton, and we're acquiring at $1,850. Alumina refining around the world, Western world alumina refining,
probably is costing between $1,500 and $2,000 a ton. We're acquiring at $600 a ton. So while in the alumina space, near-term cash flows
have been constricted, if you look at the history of this business, over the history of the business, there's been significant value created
in the bauxite and alumina side of the business.
Alex Hacking
Thanks for the color, Bill, super helpful. Could
you maybe discuss the power contract in South Africa? Thank you.
William Oplinger
Our contract runs through, I believe, 2032 or early
2030s, so it's got a strong power contract today. You may have seen that some of the ferrochrome smelters have been able to negotiate
really good power contracts in South Africa recently. We're confident that we'll be able to repower the Hillside smelter and, clearly,
we'll start working on that towards the end of the decade.
Operator
The next question comes from Timna Tanners at Wells
Fargo. Please go ahead.
Timna Tanners
Yeah. Hey. Good evening. I want to take a step
back and look at this deal as a bit more of an alumina transaction. It does require more alumina volumes, even adjusted. And alumina has
been a challenging market. You've been pointing that out in your last several decks, that the cost curve is in the red for about 50% of
production. So why is this the right time to add more alumina capacity? What are you seeing to support that decision?
William Oplinger
Two things, Timna. You need to step back and take
a long-term view of these assets. If you go back probably two years ago, I think most of our investors were saying to us, you need to
invest more in the bauxite and alumina business because it's your best returning business. Over time, the value shifts in the value chain
between mining, refining, smelting. You never quite know where the value will [inaudible] as you don't know where the constraint will
be. Right now, the constraint is in smelting capacity. Hence, the value is accruing to smelting.
If you look back over history, 2018, 2024, significant
value created and accruing to the bauxite and alumina business. So we don't look at this, necessarily, as a near-term acquisition, even
though it's going to be accretive, both on cash and earnings. It is a long-term acquisition. And on top of that, so all the numbers that
I just quoted, $1,800 a ton for smelting, $600 a ton for refining, none of that includes the synergies that will be created.
We're unlocking synergies that if you're a South32
owner or an Alcoa owner, you can't unlock yourself. We're going to unlock $900 million of synergies, and those synergies are going to
come in really 3 areas. The first is the near term. It's going to be procurement, logistics, commercial. The second is going to be applying
our expertise to these assets. We have 130 people in centers of excellence that are largely based in Western Australia, that all they
do is work on improving [inaudible] of our assets. We'll be able to do that now with more assets.
But thirdly, the most compelling is when you look
at mine planning, specifically in Western Australia, the Worsley and Boddington site is co-located with, I should say, adjoining our existing
sites. So if you look at the map, their bauxite lease is right next to our bauxite lease. We think over the next decade, we're going to
be able to unlock significant value, both at Worsley, but at Pinjarra and Wagerup as we optimize the mine plan.
So that's the exciting thing about this transaction.
I ran through the mine plan two weeks ago with the team, in detail. We have a clear mine plan with or without these assets. Now that we're
able to announce these assets, the mine plan is that much stronger.
Timna Tanners
So, appreciate that, and just a follow-up, though,
on the alumina market. Irrespective of those positives and the ability to capitalize on those assets, there are some irrational behavior
we've seen in alumina over the year. Is that something that you're expecting to continue? And do all the assets fit? Because you also
mentioned optimizing portfolios and rationalizing perhaps, or am I misunderstanding? Do all the assets fit? And how do you think about
some of the irrational behavior outside of your footprint?
William Oplinger
So when you say irrational behavior in alumina,
I would suggest to you that the alumina market has -- alumina market has been very rational over the last five to 10 years. What you see
in the alumina market, when prices dip, you see curtailments. And to some extent, you've seen some of those curtailments in China already.
The alumina pricing just recently has stabilized and recovered. So we're now looking at alumina prices that are $330 a ton, up from $305
a ton. Nice thing about the alumina market is that it's not storable. Unlike the aluminum business, where you can have inventories that
will overhang for quarters or years, alumina reacts quickly to supply and demand changes.
So where you saw real fly-ups in alumina in 2024,
as there was significant supply deficits, recall at those times, we saw alumina prices $700, $800, $900 a ton, and that's where significant
value was created. These assets combined with Pinjarra and Wagerup, which will be getting back to a first quartile style assets will generate
significant value for the shareholders over the long term.
Pinjarra and Wagerup are in a little bit of an
odd situation currently because of the bauxite to quality. But I've been in Australia for the last month, I'm convinced that we're going
to get through our permitting process, and we will be back into strong bauxite quality toward the end of the decade.
Operator
The next question comes from Bill Peterson at JPMorgan.
Please go ahead.
Bill Peterson
Yeah. Hi, good evening, and thanks for taking the
question and congrats on the deal. On the synergies, for the $50 million in annualized the first year, is there a way to break it down
between COGS and OpEx? I mean, I think you said procurement logistics and commercial. And then for the full $900 million in synergies,
I guess, is there a way to break it out by region? Or said another way, is there a particular assets or regions that carry more weight
or offer more synergies? Just trying to get a sense for kind of the crown jewels, if you will.
William Oplinger
The $50 million we've already identified that we're
going to be able to attain it very quickly, and it's going to flow through COGS. So you're going to get it in COGS. Over the long term,
the biggest opportunities for the synergies are in Western Australia. To be clear, these are not job synergies. We're not looking at massive
rationalization of jobs. What we're looking at is applying our expertise to running Worsley in a way that we can creep capacity and make
it more efficient.
In addition to that, the other big opportunity
in the six to ten year time frame is that mine planning, being able to utilize the three mines that we have, that we will have, in Western
Australia. So remember, we have Huntly, Willowdale and now we'll be able to have Boddington. If you simply look at the [inaudible] Australia,
at ML1SA and the bauxite lease of South32, they are adjoining each other. There are tremendous opportunities to optimize the mine plan
with those, so that's where the lion's share of the synergies.
Not a lot of synergies in Brazil. We are [inaudible]
so small synergies there. Maybe some opportunities to creep Hillside, but the big lion's share of the synergies is in Western Australia.
And I should come back to -- I just remembered that Timna specifically asked me about rationalization of assets. There's no [inaudible]
the portfolio considered at this point.
Bill Peterson
Yeah. And maybe to follow up directly on the point
about Western Australia, this still would mean that you would be pursuing the new mine regions in Mayara, North and Holyoake; is that
right? Or would these -- are they part of that mine site you spoke of, or would it be de-prioritized [inaudible]?
William Oplinger
No. In the short term, we will continue to pursue
our part four permits and the new mine moves into Mayara North and Holyoake. That's what gets us into the better bauxite. This transaction
does not impact that. As we look forward, six to ten years out in the future, we will be able to optimize the three mines, but this has
no impact on our permitting and short-term bauxite opportunities.
Operator
The next question comes from Chris LaFemina at
Jefferies. Please go ahead.
Chris LaFemina
Hey, Bill, congrats, and thanks for taking my questions.
So the first one I have is, in the press release, you note that you have the $3.1 billion bridge loan, which you intend to replace with
cash from the balance sheet and permanent debt financing prior to the transaction close. So you're adding on 2025 numbers, $900 million
of EBITDA and taking on $3.1 billion of debt, and that doesn't include the contingent payments that you might have to make later. And
I'm just wondering first whether an equity issuance at some point might be part of the strategy to recapitalize the balance sheet, or
is that simply not the base case at the moment?
Molly Beerman
So Chris, it's Molly. The base case does include
the $1 billion value of equity. As we think about the -- we'll have the bridge loan commitment in the near term, but when we replace that,
we will look at the mix of cash from the balance sheet, as well as long-term unsecured notes for the balance of the debt portion of the
consideration.
Chris LaFemina
OK. So the $3.1 billion, we should just look at
that as being -- it's going to be debt, not equity, basically, right?
Molly Beerman
Correct. That with the mix of cash on the balance
sheet. We've got great projections for cash generation through the end of this year, even into '27. So we will optimize cash from the
balance sheet as well in that mix.
William Oplinger
And Chris, if I could jump in on that one also.
So when you think about the $3.1 billion, we are going to be significantly cash flow generative in the second half of this year. You know
that with the higher prices, we built up significant working capital. If prices remain where they are, we should see that working capital
flow out in the second half of the year. In addition to that, if you then extend your time horizon and think about the future a little
bit, we've talked about $500 million to $1 billion of cash from our asset sales in the data center area. On top of that, we're right around
the corner in mid-2028, being able to monetize the Ma’aden shares.
So the first tranche of Ma’adan shares is
worth about [inaudible] that is in mid-2028. So this $3.1 billion, which will be a mix of cash from the balance sheet and some borrowing
is very manageable for the company. I think that when we consider the earnings power -- and then on top of that, we didn't really talk
about the lockbox. But depending on what metal prices look like, the lockbox could have significant cash in it. So very manageable at
the $3.1 billion level. Molly and I are completely comfortable with that leverage level. We've also run through the RAS/RES process with
the rating agencies, and we feel good there.
Operator
The next question comes from John Tumazos at John
Tumazos Very Independent Research. Please go ahead.
John Tumazos
Thank you for taking my question. Could you explain
the duration of the Hillside electricity contract and update us on the duration of the Alumar electricity contract, please?
William Oplinger
I'll take Hillside first; Molly will take Alumar,
because I would be guessing. But Hillsides through 2032. And John, as I said to a prior question, ferrochrome smelters in South Africa
recently got some pretty strong power contracts with the strategic importance of Hillside to South Africa, I am confident that we will
be able to repower Hillside very effectively. And then third, when you look at the valuations that we are paying for these assets, we
have a very conservative estimate of what power pricing would be in Hillside post-2032, that I think we will be able to beat. Alumar,
Molly, when does Alumar expire?
Molly Beerman
Yeah, I'm going to correct you on Hillside, it's
through '31. And then on Alumar, it's through 2038. We signed a 15-year contract there when we started the restarts.
John Tumazos
The South32 release mentions the assumption of
$1.2 billion of reclamation liabilities. Would that be accurate on the Alcoa's books too?
Molly Beerman
Yeah, so John, the $1.2 billion on South32's books
is both asset retirement obligations, as well as environmental reserves. Now, they're on IFRS accounting, so they do have different estimation
techniques. They have to include conditional AROs, which assumes that a closure date is known and their estimates have to include that.
U.S. GAAP does not require that, so they will come on to our books at about $400 million.
Operator
Once again, to ask a question, please press star
then one. And our next question comes from Nick Giles at B. Riley Securities.
Nick Giles
Yeah. Thanks, Operator. Guys, congrats on the deal
here. Just back to the synergies, the life of asset planning, the benefits are fairly long dated. So how do we set the baseline, or what
are the ways in which we can track progress on this front? Where does that sustaining CapEx and operating cost profile really stand today?
Thanks.
Molly Beerman
So on the long-term mine plans, we are looking
at a 40-year life of mine plan. So if you look at the savings over that, obviously, the NPV on that comes back to today at a smaller number.
But we have considerable spend expected in the early to mid-2030s for a mine move that we believe we'll be able to modify and have as
much lower costs. Remember, mine moves are hundreds of millions of dollars at a time. And as we look at the plan, we believe that we'll
be able to optimize those mine moves.
Nick Giles
Got it. Thanks for that Molly. And then maybe just
a follow-up. I think, Bill, you said that you're not ready for any rationalization of supply today, but I was curious if you are ready
for optimization and specifically as it relates to San Ciprian, how this deal could kind of impact the outlook there? Thank you.
William Oplinger
There's no impact from this deal on San Ciprian.
You've heard me talk pretty extensively, and, Molly [inaudible] San Ciprian. We have the viability agreement on the smelter that we continue
to live up to. At this point, the smelter is cash flow generating. The refinery is -- negatively impacts that. The refinery at these levels
is [inaudible] so the target is to have a cash neutralization program for 2027, and so this deal does not have an impact on San Ciprian.
Operator
The next question comes from Richard Burke at Bloomberg
Intelligence. Please go ahead.
Richard Burke
Yes, thank you for taking my question. On the slides,
you gave production of the assets that you're acquiring over the last five years. I was wondering if you had a range of EBITDA for those
same assets in 2025 that produced $900 million?
Molly Beerman
It is approximately $900 million, actually maybe
rounding down to $800 million. And South32 actually included that in their release. They have the average for 2021 to '25. They're using
it to calculate their multiple.
William Oplinger
And just remember, 2021 included a COVID year and
[inaudible] world is not expecting a COVID year to repeat.
Richard Burke
Also, is there a floor ceiling on the stock price
that has to be maintained?
William Oplinger
No.
Richard Burke
And the synergy program, is there a cost of --
what's your cash cost to implement the synergy program?
Molly Beerman
There are minimal cash costs. In the middle category
on slide six, where we have the process technology, we have savings there, and that's about 30% of the total NPV. We will have some CapEx
spend to get those process technology benefits, but it's not hugely significant.
William Oplinger
And as far as one-time integration costs associated
with the systems, we've netted the one-time integration costs [inaudible] synergies, so that is baked into our synergies estimate.
Molly Beerman
That was -- Bill, there was a slight gap in the
line. I just want to fill in that the integration costs are netted against the $900 million in synergies.
William Oplinger
Thank you. And I'm joining you from Australia today,
so if there are any breaks in the line, we've got Pittsburgh on the line and Australia on the line, so we apologize if there are any technical
issues.
Operator
The next question comes from Jacob Li at Barrenjoey.
Please go ahead.
Jacob Li
Hi, Bill, Molly and team, thanks for the question.
I think you talked to bigger synergy being in WA just now. Just trying to dig into that a bit more. Bauxite from Boddington,
are they complementary to Alcoa's needs at Pinjarra and Wagerup or sort of different quality of bauxite? Is there early benefits you could
pick up from sort of early access to bauxite [inaudible]? For example, I think you previously talked about the cost benefits from picking
up better quality bauxite ore. Thanks.
William Oplinger
Yes. So to be clear, Worsley and Pinjarra use different
types of bauxite. We use what's called a granitic bauxite in Pinjarra. Worsley uses what's called a greenstone bauxite. Our mining lease
has greenstone bauxite in it. Their mining lease has granitic bauxite in it. We will be managing the blending of those bauxites to maximize
and optimize the output of Worsley and Pinjarra. So there are tremendous opportunities to be able to blend the bauxite grades to achieve
a very favorable outcome at both Pinjarra and Worsley.
Jacob Li
Thanks, Bill. Just a follow-up on that. So does
this deal somewhat simplify your business in WA from other perspectives that shows terming of new mining areas, Mayara North, if any?
Thanks.
William Oplinger
What it does is, first and foremost, and I've already
made some phone calls this morning with senior leaders in Australia, is it strengthens the Australian business significantly. Having these
assets together in Australia will make them more competitive globally, and that's a positive for Australia. So the permitting process
for our existing assets will continue to run. We have a part four permit that we're working on to be able to move our mines to Mayara
North on Holyoake. The permitting process is largely completed for South32. That's one of the big positives, that these assets have gone
through their permitting process.
So I think that the majority of our stakeholders
really understand the rationale for this deal and are excited about the opportunity to make a stronger Western Australian alumina….bauxite
and alumina business.
Operator
The next question comes from Mitch Ryan at Jefferies.
Please go ahead.
Mitch Ryan
Morning, all. Thank you for taking my question.
Can you just -- I know that the deal is structured so that there is no Alcoa shareholder vote. Can you just talk me through that process
and the rationale for that?
Molly Beerman
So the shares that we will be issuing is about
6% of Alcoa's outstanding shares, so that does not cause us to require a vote.
William Oplinger
And in the case of South32, they will be going
to a shareholder vote. We expect that in the October, November timeframe. And their Board has recommended this transaction to their shareholders.
So we -- that's one of the milestones that will occur between now and closing.
Mitch Ryan
OK. Thank you.
Operator
This concludes our question and answer session.
I would like to turn the conference over to Mr. Oplinger for closing remarks.
William Oplinger
Thanks to everybody for joining us so quickly to
discuss this transaction. If you can hear it in our voices, Molly and I are extremely excited about the opportunity that this brings.
We think that this is the right transaction [inaudible] company. It is a great strategic fit. It provides compelling financial returns
immediately. And on top of those financial returns, we've got $900 million of synergies that we've identified. We've spent a decade putting
the company in a position to be able to execute upon this type of a transaction. And in our view, we're able to capture upside value for
our shareholders that we wouldn't be able to capture on our own. That's why it's such a critical transaction.
I appreciate your time today, and we'll be talking
to you over the next few days, I'm sure. Thank you. Bye.
Operator
The conference has now concluded. Thank you for
attending today's presentation. You may now disconnect.
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statements, including, without limitation, statements regarding the proposed transaction; the ability of the parties to complete the proposed
transaction on the expected timeline or at all considering the closing conditions; the expected benefits of the proposed transaction,
including the anticipated synergies and earnings per share and free cash flow accretion; the competitive ability and position following
completion of the proposed transaction; the ability to complete any proposed debt financing in connection with the proposed transaction;
forecasts concerning global demand growth for bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts
of future or targeted financial results, or operating performance (including our ability to execute on strategies related to environmental,
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based on Alcoa’s perception of historical trends, current conditions, and expected future developments, as well as other factors
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are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although Alcoa believes
that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these
expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking
statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) the non-satisfaction
or non-waiver, on a timely basis or otherwise, of one or more closing conditions to the proposed transaction; (b) the prohibition or delay
of the consummation of the proposed transaction by a governmental entity; (c) the risk that the proposed transaction may not be completed
in the expected time frame or at all; (d) unexpected costs, charges or expenses resulting from the proposed transaction; (e) uncertainty
of the expected financial performance following completion of the proposed transaction; (f) uncertainty of any contingent payment required
to be made in connection with the proposed transaction following completion; (g) failure to realize the anticipated benefits of the proposed
transaction; (h) the occurrence of any event that could give rise to termination of the proposed transaction; (i) potential litigation
in connection with the proposed transaction or other settlements or investigations that may affect the timing or occurrence of the contemplated
transaction or result in significant costs of defense, indemnification and liability; (j) the impact of global economic conditions on
the aluminum industry and aluminum end-use markets; (k) volatility and declines in aluminum and alumina demand and pricing, including
global, regional, and product-specific prices, or significant changes in production costs which are linked to the London Metal Exchange
(LME) or other commodities; (l) the disruption of market-driven balancing of global aluminum supply and demand by non-market forces; (m)
competitive and complex conditions in global markets; (n) our ability to obtain, maintain, or renew permits or approvals necessary for
our mining operations; (o) rising energy costs and interruptions or uncertainty in energy supplies; (p) unfavorable changes in the cost,
quality, or availability of raw materials or other key inputs, or by disruptions in the supply chain; (q) economic, political, and social
conditions, including the impact of trade policies, tariffs, and adverse industry publicity; (r) legal proceedings, investigations, or
changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (s) changes in tax laws or exposure to additional
tax liabilities; (t) climate change, climate change legislation or regulations, and efforts to reduce emissions and build operational
resilience to extreme weather conditions; (u) disruptions in the global economy caused by ongoing regional conflicts and wars; (v) fluctuations
in foreign currency exchange rates and interest rates, inflation and other economic factors in the countries in which we operate; (w)
global competition within and beyond the aluminum industry; (x) our ability to achieve our strategies or expectations relating to environmental,
social, and governance considerations; (y) claims, costs, and liabilities related to health, safety and environmental laws, regulations,
and other requirements in the jurisdictions in which we operate; (z) liabilities resulting from impoundment structures, which could impact
the environment or cause exposure to hazardous substances or other damage; (aa) dilution of the ownership position of the Company’s
stockholders (including as a result of the proposed transaction), price volatility, and other impacts on the price of Alcoa common stock
by the secondary listing of the Alcoa common stock on the Australian Securities Exchange; (bb) our ability to obtain or maintain adequate
insurance coverage; (cc) our ability to execute on our strategy to reduce complexity and optimize our asset portfolio and to realize the
anticipated benefits from announced plans, programs, initiatives relating to our portfolio, capital investments, and developing technologies;
(dd) our ability to integrate and achieve intended results from joint ventures, other strategic alliances, and strategic business transactions;
(ee) significant declines in the market value of our marketable securities; (ff) our ability to fund capital expenditures; (gg) deterioration
in our credit profile or increases in interest rates; (hh) impacts on our current and future operations due to our indebtedness and our
ability to reduce indebtedness; (ii) our ability to continue to return capital to our stockholders through the payment of cash dividends
and/or the repurchase of our common stock; (jj) cyber attacks, security breaches, system failures, software or application vulnerabilities,
or other cyber incidents; (kk) labor market conditions, union disputes and other employee relations issues; and (ll) the other risk factors
discussed in Alcoa’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other reports filed by Alcoa with
the Securities and Exchange Commission (“SEC”). Certain illustrative pro forma information included in certain investor materials
may differ materially from pro forma information included in SEC filings, including the Registration Statement (as defined below). Alcoa
cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.
These risks, as well as other risks associated with the proposed transaction, will be more fully discussed in the Registration Statement.
Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events
or otherwise, except as required by applicable law. Neither Alcoa nor any other person assumes responsibility for the accuracy and completeness
of any of these forward-looking statements.
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This communication is for informational purposes
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to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
Additional Information and Where to Find It
This communication relates to the proposed transaction.
In connection with the proposed transaction, Alcoa plans to file with the SEC relevant materials, including a registration statement on
Form S-4 that will include a prospectus of Alcoa (including documents incorporated by reference therein, the “Registration Statement”).
This communication is not a substitute for the Registration Statement or any other document that Alcoa may file with the SEC in connection
with the proposed transaction. Before making any investment decision, Alcoa’s investors and shareholders are urged to read the Registration
Statement and all relevant documents filed or to be filed with the SEC, as well as any amendments or supplements to those documents, when
they become available, because they will contain important information about Alcoa and the proposed transaction.
Alcoa’s investors and shareholders will be
able to obtain a free copy of the Registration Statement, as well as other filings containing information about Alcoa, free of charge,
at the SEC’s website (www.sec.gov). Copies of the Registration Statement and other documents filed by Alcoa with the
SEC may be obtained, without charge, by contacting Alcoa through its website at https://investors.alcoa.com/.
