A $52 million impairment has been taken by Alcoa World Alumina Corporation on its share of the Warro gas project in the Perth Basin, after the company determined exploration results by project operator Transerv Energy did not support the existing carrying value.
AWAC’s local subsidiary Alcoa of Australia had an agreement to earn up to 65 per cent of Warro, which is majority owned by Transerv, by funding $100 million of exploration and development work.
Based on expenditure to date, Alcoa has a right to 63.5 per cent of the field, whch is one of the largest undeveloped onshore gas fields in Australia.
In October, work on three of the Warro wells, some of which had required hydraulic fracturing work, was suspended.
At the time, Transerv said the wells had delivered sustained gas flows yet would not be economic at current gas prices and cost levels.
Transerv then said it would focus on advancing drilling at the Perth Basin's Xanadu prospect with Norwest Energy.
AWAC is 60 per cent owned by NYSE-listed Alcoa Corporation and 40 per cent by ASX-listed Alumina.
The company also made the move to close its Suralco operations in Suriname.
That will mean $108 million of restructuring costs and $181 million of cash costs in the next five years for AWAC.
Alcoa chief executive Roy Harvey said the company would be streamlining and strengthening its portfolio into 2017.
“We are working in partnership with the Government of the Republic of Suriname to reach the best possible solution that would enable Suriname to maintain its bauxite industry,” Mr Harvey said.
“Dialogue is ongoing and progress is being made,”
Alcoa said that a recent power outage at the Portland smelter in Victoria was unlikely to have a significant impact on its results.
That operation is 55 per cent owned by Alcoa of Australia, 22.5 per cent by Citic and 22.5 per cent by Marubeni Aluminium Australia.
