TORONTO, ON – August 14, 2007 – Global Alumina Corporation (TSX: GLA.U) (the “Company” or “Global Alumina”), a company developing an alumina refinery located in the bauxite-rich region of the Republic of Guinea (the “Guinea Alumina Project” or the “Project”, previously the “Sangar&eactute;di Refinery Project”), announced today its financial and operating results for the three-month period ending June 30, 2007¹. The text of the quarterly unaudited financial statements and management’s discussion and analysis can be viewed or printed from the Company’s SEDAR reference page at www.sedar.com. All dollar amounts are in U.S. dollars.
Significant Corporate Events:
Joint Venture Transaction Completed
Most significantly in the quarter, Global Alumina completed on May 17, 2007 a joint venture transaction under which it sold for aggregate proceeds of $260 million two-thirds of its interest in Guinea Alumina Corporation, Ltd. (“Guinea Alumina”) which together with its wholly-owned Guinean subsidiary, Guinea Alumina Corporation, S.A., is the owner and developer of the Project. The transaction resulted in a dilution gain of $151.5 million, $88.0 million of which was recognized at completion upon receipt of the initial subscription payment of $151.1 million and $63.4 million was deferred pending receipt of the remaining $108.9 million of subscription payments to be paid in three installments subject to Guinea Alumina achieving certain future milestones.
As a result of this transaction, Global Alumina received net proceeds of $120,066,121, recorded a subscription payment receivable of $108.9 million, retained a one-third, joint-controlling interest in Guinea Alumina and brought the significant interests of each of BHP Billiton (one-third), DUBAL (one-fourth) and Mubadala (one-twelfth) as strong development partners to Guinea Alumina. Additionally, Guinea Alumina fully repaid the $59.7 million then outstanding under the subscriber loan facility and increased its cash balances by $24.7 million by means of a concurrent, pro rata capital contribution. Invested capital in Guinea Alumina and the Project reached $320 million as of June 30, 2007.
As of the May 17, 2007 transaction completion, the Company’s remaining one-third interest is proportionately consolidated according to Canadian GAAP. Consequently, the Company’s pro rata share of each of the assets, liabilities, revenues and expenses of Guinea Alumina has been combined on a line-by-line basis with similar items in the Company’s financial statements. Historical financial statements presented reflect 100% ownership of Guinea Alumina up to May 17, 2007.
Review of Second Quarter 2007 Results:
Due to the $88.1 million dilution gain realized in the quarter, Global Alumina realized net income of $84.3 million or $0.41 per share for the three months ended June 30, 2007; compared with a loss of $5.0 million or $0.03 per share for the same period in 2006.
As of June 30, 2007, Global Alumina had consolidated assets of $327.0 million, including approximately $97.6 million in an escrow account reserved for its one-third share of future capital requirements of Guinea Alumina, an additional $23.3 million of unrestricted cash and $108.9 million due from its joint venture partners. It also had no debt, $9.7 million of payables and accruals ($8.6 million of which represents its one-third interest in Guinea Alumina’ payables and accruals), its one-third interest of $10.6 million in Guinea Alumina’s cash, and shareholders’ equity plus deferred dilution gain equal to $317.3 million.
During the quarter, Guinea Alumina transitioned from a wholly-owned Global Alumina subsidiary to a joint venture company owned one-third by each of Global Alumina and BHP Billiton, one-fourth by DUBAL and one-twelfth by Mubadala. The joint venture verified the historical body of work for the benefit of the new owners and agreed to (1) conduct a bankable feasibility study in accordance with BHP Billiton standards to be completed by yearend 2007, (2) continue the ongoing early works’ construction program and (3) implement certain cost reduction opportunities identified during the new owners’ verification phase.
In addition to advancing the engineering and procurement work, Guinea Alumina’s continuing early works’ construction program in the quarter included resettlement, vocational training, refinery area clearing, earth works for the rail spur from the main line to the refinery site, storm water pond blasting and dyke construction, and installation of a new bridge at Bok&eactute; to remove the only existing road transportation bottleneck for heavy construction loads from the port of Kamsar to the refinery site.
During the quarter, Guinea Alumina capitalized an additional $27.3 million ($9.1 million Global Alumina share) to construction in progress, bringing the balance as of June 30, 2007 to $234.2 million ($78.1 million Global Alumina share).
At the end of June, Guinea Alumina was directly responsible for the employment of 1,191 people in Guinea, including over 1,000 Guineans.
Pending completion of the bankable feasibility study, Guinea Alumina adopted preliminary working estimates for the alumina refinery’s initial capacity at 3.2 million tonnes per year, a $3.2 billion cost to complete construction with production commencing in 2011. The final cost estimates and construction schedule will depend on the completion of engineering studies and the negotiation of construction and financing arrangements undertaken as critical elements of Guinea Alumina’s bankable feasibility study to be completed by December 31, 2007.
¹Unless otherwise stated, all financial figures discussed in this announcement are unaudited, prepared in accordance with Canadian generally accepted accounting principles for interim financial statements, expressed in U.S. dollars as of June 30, 2007, and represent comparisons between the three-month period ended June 30, 2007 and the equivalent three-month period ended June 30, 2006.