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Alumina Ltd. Company News Alert Significant decline in common stock price Common Stock
Ticker: Target price: Current price:

30 June 2008

SELL

Alumina Limited’s (Alumina) common stock has declined significantly since our last update report, mainly due to a rise in the prices of raw materials for producing alumina. The price movement is, however, in line with our expectation. Therefore, although our current common stock target price suggests a HOLD, we maintain our SELL rating.

AWC.AX A$4.31 A$4.78 We will reassess our common stock rating for Alumina after the company releases its 1H 08 results on 31 July 2008. Although, we anticipate a positive currency impact on the ADR over our investment horizon, given the current price levels, we maintain our SELL rating for the ADR.

Price change since (22.2)% previous report:

ADR
Ticker: Target price: Current price:

SELL
AWC US$16.39 US$18.27

Price change since (18.7)% previous report: Supervisor: Bhavesh Chauhan Analyst: Chaitali Paul Editor: Shem Pennant Global Research Director: Satish Betadpur, CFA Next news due: 1H 08 results, 31 July 2008

We will reassess our ADR rating for Alumina after the company releases its 1H 08 results on 31 July 2008.

Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for readers with a shorter trading horizon. These are available online only at www.researchoracle.com.

In our 4Q 07 and FY 2007 update report, dated 05 March 2008, we rated the Alumina common stock a SELL on fundamental grounds, with a 6-12 month target price of A$4.31 and a potential downside of 30%. Since then, the common stock has declined 22.2%, in line with our expectation, mainly driven by an increase in raw material costs for producing alumina. According to ICIS (the world’s largest information provider for the chemical and oil industry), caustic soda prices have almost doubled in the last six months, increasing 70.0% q-o-q from US$300 per dry tonne to US$500 per dry tonne. In addition, the price of coal has increased significantly putting significant margin pressure on companies producing alumina. Furthermore, on 11 June 2008, the company announced cuts in its profit forecasts for 1Q 08, after Varanus Island gas plant, a natural gas producing plant collapsed and cut supplies to joint venture operations in Western Australia. Therefore, we maintain our SELL rating for the common stock.

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