The majority of cost components experienced a y-o-y decrease in their costs in 2013, with just fuel and maintenance/consumables costs seeing growth and power costs remaining unchanged. The 3.6% y-o-y decrease in the world average site cost was driven predominantly by a reduction in the average royalty cost, which fell by 14.6% y-o-y. Site costs have increased in prior years, rising by 4.0% y-o-y in 2012 and 13.6% y-o-y in 2011.

Executive summary i

Site costs decreased by 3.6% in 2013, but cost growth is expected out to 2016 i

Labour remained the largest component of world average site costs in 2013 ii

Lower royalties drove the 3.6 % decrease in world average site and cash costs iii

Business costs continue to fall in 2014 and remain subdued out to 2016 v

China expands its domestic production and diversifies bauxite imports vi

Points to watch vii

The CRU bauxite and alumina cost model viii

Chapter 1 1-1

Introduction 1-1

1. Introduction 1-2

2. Units and abbreviations 1-3

Chapter 2 2-1

Scope of the bauxite cost service report 2-1

1. Scope of the model 2-2

      1.1 Coverage 2-2

      1.2 Products 2-6

      1.3 Processes 2-6

      1.4 Units of cost 2-8

      1.5 Value in use 2-8

Chapter 3 3-1

CRU’s value based approach to analysing costs 3-1

1. Background 3-2

2. Applications for VBC 3-6

3. Concepts and definitions 3-7

      3.1 Raw material costs 3-8

      3.2 Conversion costs 3-9

      3.3 Site costs 3-11

      3.4 Realisations costs 3-11

      3.5 Business costs 3-13

      3.6 Other costs 3-13

      3.7 Corporate costs 3-14

      3.8 Capital costs 3-14

      3.9 Economic costs 3-16

4. VBC applied to bauxite mining operations 3-17

      4.1 Raw material costs 3-17

      4.2 Conversion costs 3-17

      4.3 Site costs 3-17

      4.4 Realisations costs 3-17

      4.5 Business costs 3-18

      4.6 Other costs 3-18

      4.7 Corporate costs 3-18

      4.8 Capital costs 3-18

      4.9 Economic costs 3-18

Chapter 4 4-1

Bauxite specifications 4-1

1. Aluminium ore 4-2

2. Specification of bauxite ore 4-4

Chapter 5 5-1

Prospects for the main determinants of costs 5-1

1. The major cost components 5-2

2. Royalties 5-5

3. Labour costs 5-7

      3.1 Full wage and benefit costs 5-7

      3.2 Labour productivity 5-8

      3.3 Average industry labour costs 5-9

      3.4 Average labour costs by region and company 5-9

4. Fuel costs 5-13

5. Power costs 5-15

6. Greenhouse Gas (GHG) Emissions 5-17

7. Explosives cost, maintenance/consumables cost and sustaining capital 5-18

8. World average main cost determinants 5-21

Chapter 6 6-1

Bauxite mining site costs and cash costs 6-1

1. The outlook for site costs 6-2

2. Regional average site costs 6-4

3. Company average site costs 6-6

4. The outlook for cash costs 6-8

5. Regional average cash costs 6-10

6. Company average cash costs 6-12

7. World average site and cash costs 6-14

Chapter 7 7-1

Bauxite mining business, corporate and economic costs 7-1

1. Value in use 7-3

2. The outlook for business costs 7-5

3. Regional average business costs 7-8

4. Company average business costs 7-10

5. The outlook for corporate costs 7-11

6. Regional average corporate costs 7-12

7. Company average corporate costs 7-13

8. The outlook for economic costs 7-14

9. Regional average economic costs 7-16

10. Company average economic costs 7-17

11. World average site, business, corporate and economic costs trends 7-18

Chapter 8 8-1

Bauxite supply and cost analysis: the alumina refinery perspective 8-1

1. The pattern of bauxite supply 8-2

      1.1 The current pattern 8-2

      1.2 The outlook for bauxite supplies 8-9

2. Determination of bauxite costs 8-20

3. World average integrated and traded bauxite costs 8-22

4. Regional integrated and traded bauxite costs 8-23

5. The integrated and traded bauxite cost trends 8-25

Appendix A A-1

Ownership of world bauxite mines in 2013 A-1

Appendix B B-1

Estimates and forecasts of world bauxite production, 2011-2016 B-1

Appendix C C-1

Alumina, aluminium price and exchange rate forecasts

1. Base case alumina and metal price assumptions C-2

2. Base case exchange rate assumptions C-4

Appendix D D-1

Macroeconomic cost drivers, 2014-2023 D-1

1. Introduction D-2

      1.1 Overview of macroeconomic cost drivers D-2

      1.2 Forecast risks D-3

2. Exchange Rates and Labour D-4

      2.1 Exchange Rates D-4

      2.1.1 Short to mid-term outlook D-4

      2.1.2 Fundamentals and longer-term outlook D-6

      2.2 Labour costs D-6

      2.2.1 Short to mid-term outlook D-6

      2.2.2 Fundamentals and longer-term outlook D-7

3. Fuel, energy and power costs D-8

      3.1 Oil D-8

      3.1.1 Short to mid-term outlook D-8

      3.1.2 Fundamentals and longer-term outlook D-8

      3.2 Natural gas D-9

      3.2.1 Short to mid-term outlook D-9

      3.2.2 Fundamentals and longer-term outlook D-10

      3.3 Steam coal D-10

      3.3.1 Short to mid-term outlook D-10

      3.3.2 Fundamentals and longer-term outlook D-11

      3.4 Carbon Dioxide (CO2) D-12

      3.4.1 Short to mid-term outlook D-12

      3.4.2 Fundamentals and longer-term outlook D-12

      3.5 Electrical power D-13

      3.5.1 Short to mid-term outlook D-13

      3.5.2 Fundamentals and longer-term outlook D-15

4. Sea freight costs D-16

      4.1 Dry bulk freight developments D-16

      4.1.1 Short to mid-term outlook D-16

      4.1.2 Fundamentals and longer-term outlook D-16

      4.2 Container freight developments D-17

      4.2.1 Short to mid-term outlook D-17

      4.2.2 Fundamentals and longer-term outlook D-17

5. Capital costs D-18

      5.1 Project costs D-18

      5.1.1 Short to mid-term outlook D-18

      5.1.2 Fundamentals and longer-term outlook D-19

      5.2 Financing costs D-19

      5.2.1 Short to mid-term outlook D-19

      5.2.2 Fundamentals and longer-term outlook D-20

Appendix E E-1

Bauxite mine site costs disaggregated by the major cost E-1

components in 2013 and 2016

Appendix F F-1

Bauxite mine site costs by region, 2013 and 2016 F-1

Appendix G G-1

Bauxite mine site costs by major producer, 2013 and 2016 G-1

Appendix H H-1

Bauxite mine costs by VBC concept in 2013 H-1

Appendix I I-1

Bauxite mine costs by VBC concept in 2016 I-1

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