Alcoa inks investment pact with Saudi Arabia's Ma'aden valued at nearly $11 billion

Alcoa and its partners will own 40% of the project and Saudi Arabia will own 60%. Shares of Alcoa, a component of the Dow Jones Industrial Average , rose 4% to $15.17 in pre-market trading, as Morgan Stanley separately upgraded its rating on Alcoa to overweight from equal-weight with a $22 price target.

The Saudi joint venture “will become the world’s preeminent and lowest-cost supplier of primary aluminum, alumina and aluminum products, with access to the growing markets of the Middle East and beyond,” the companies said. The venture will develop a fully integrated industrial complex, including a bauxite mine, a refinery, an aluminum smelter, a rolling mill and other facilities.

Alcoa will control 40% of the joint venture through an investment partnership in which it will own 20% and its partners will participate through financing that represents the other 20%. Alcoa and the partners will each invest $900 million over a four-year period and will be responsible for their pro-rata share of the project financing, in addition to specific completion commitments.

Alcoa President and CEO Klaus Kleinfeld said the venture amounts to a “once-in-a-generation opportunity” for the company. The company will provide know-how, management expertise and support during the design, construction and operation of the mine, refinery, smelter and rolling mill.

In addition, Alcoa will arrange the supply of alumina feedstock to the smelter from outside Saudi Arabia until the project refinery comes on stream. Alcoa and Ma’aden will work with leading international and local firms on the design and construction of the complex. (MarketWatch)