Investing to Wealth

Century Aluminum Co (NASDAQ: CENX)

Century Aluminum Company (Century Aluminum) is a holding company engaged in producing aluminum. The Company’s principal subsidiaries are Century Aluminum of West Virginia Inc. (Century of West Virginia), Berkeley Aluminum Inc. (Berkeley), Century Kentucky Inc. (Century Kentucky) and Nordural ehf (Nordural). Century of West Virginia, and operates a primary aluminum reduction facility in Ravenswood, West Virginia (Ravenswood). Berkeley holds a 49.7% interest in a partnership, which operates a primary aluminum reduction facility in Mt. Holly, South Carolina (Mt. Holly) and a 49.7% undivided interest in the property, plant and equipment comprising Mt. Holly. The remaining interest in the partnership and the remaining undivided interest in Mt. Holly are owned by Alumax of South Carolina Inc., a subsidiary of Alcoa (ASC). It also holds 50 percent joint venture interests in the Gramercy alumina refinery, located in Gramercy, Louisiana and a related bauxite mining operation in Jamaica.

The Company was founded in 1981 and is based in Monterey, California.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=CENX , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=CENX.O , http://www.centuryaluminum.com/

Financial Summary

CENX recently posted its third-quarter results for the period ended June 30, 2009. The Company recognized an impairment loss on its equity investments in Gramercy and SABL of approximately $73 million in the three months ended June 30, 2009. The Company will make a $10 million payment to Noranda, with $5 million due at closing and $5 million to be paid on or prior to December 31, 2009. It expects that some additional losses will be incurred on this transaction for other closing costs associated with the transaction.

During the three months ended June 30, the costs associated with the idled potlines at CENX’s Ravenswood and Hawesville facilities were $9.2 million. This amount includes expenses incurred while the Ravenswood facility is in an idled state and net losses associated with spot alumina sales and cancellation costs from the Glencore alumina supply agreement.

During the six months ended June 30, the costs associated with the idled potlines at CENX’s Ravenswood and Hawesville facilities were $33.5 million. This amount includes the recognition of employee-related liabilities, contractual obligations and net losses from the cancellation of the Glencore alumina supply agreement and sales of alumina made available by the idling of capacity. In addition, certain expenses incurred while the Ravenswood facility is in an idled state are included in this line item.

The net loss in the three and six months ended June 30, 2009, relates to the recognition of previously settled Icelandic krona hedges associated with the Helguvik project and losses on derivatives associated with Hawesville and Ravenswood power contracts.

The loss on forward contracts for the three and six months ended June 30, 2008, was a result of mark-to-market adjustments associated with the Company’s long term primary aluminum forward financial sales contracts that did not qualify for cash flow hedge accounting. Cash settlements of these contracts during the three and six months ended June 30, 2008, were $62.8 million and $115.0, respectively. In July 2008, CENX terminated these contracts.

Lower price realizations for CENX’s primary aluminum shipments in the three months ended June 30, 2009, due to lower LME prices for primary aluminum, resulted in a $196.3 million sales decrease. Reduced sales volume contributed $159.7 million to the decrease in net sales. Direct shipments declined 120.9 million pounds in the three months ended June 30, 2009 primarily due to capacity curtailments at the Company’s U.S. smelters. Toll shipments increased 5.2 million pounds from the same period in 2008 due to increased production at the Grundartangi smelter.

Lower price realizations for the Company’s primary aluminum shipments in the six months ended June 30, 2009, due to lower LME prices for primary aluminum, resulted in a $358.1 million sales decrease. Reduced sales volume contributed $244.5 million to the decrease in net sales. Direct shipments declined 199.4 million pounds in the six months ended June 30, 2009, primarily due to capacity curtailments at CENX’s U.S. smelters. Toll shipments increased 8.2 million pounds from the same period in 2008 due to increased production at the Grundartangi smelter.

CENX’s consolidated cash balance at June 30, 2009, was approximately $230 million. It believes the current availability under its revolving credit facility is approximately $30 to $35 million. This availability has been reduced by the curtailments of operations at the Ravenswood and Hawesville facilities and the reduced value of the Company’s inventory and receivables due to the decrease in primary aluminum prices. CENX’s revolving credit facility will mature in September 2010. The holders of its $175 million principal amount of 1.75% convertible senior notes have an option to require the Company to repurchase all or any portion of these securities at par in August 2011. At any time prior to August 2011, the holders of CENX’s convertible senior notes may exercise their conversion right and require the Company to deliver cash based on market value up to the principal amount of the convertible notes. These events would increase CENX’s liquidity needs.

Source: http://investor.shareholder.com/cenx/sec.cfm

Analyst Consensus

This is the consensus forecast amongst 7 polled investment analysts. Against the Century Aluminum Co company.

The 6 analysts offering 12 month price targets for CENX have a median target of 10.50, with a high estimate of 14.00 and a low estimate of 8.00. The median estimate represents a 13.15% increase from the last price of 9.28.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=CENX.O

Investment Highlights

CENX’s primary aluminum capacity currently stands at 785,000 tonnes. The Company owns and operates a 244,000 tonne plant at Hawesville, Kentucky, a 170,000 tonne plant at Ravenswood, West Virginia, and the plant at Grundartangi, Iceland. Century also owns a nearly 50% interest in a 222,000 tonne reduction plant at Mt. Holly, South Carolina. Alcoa Inc. owns the remainder and is the operating partner.

CENX last month announced that the sale of its 50% joint venture ownership positions in Gramercy Alumina LLC and St. Ann Bauxite Limited to Noranda Aluminum Holding Corporation was completed on August 31. With the closing of this transaction, Century has divested itself of its entire interest in these businesses. Century Aluminum Company owns primary aluminum capacity in the United States and Iceland. Century’s corporate offices are located in Monterey, California.

CENX recently announced that its board of directors has adopted a tax benefit preservation plan designed to preserve its substantial tax assets. As of December 31, 2008, CENX had tax attributes, including net operating losses, capital losses and tax credit carry-forwards of approximately $1.6 billion after adjusting for losses carried back to previous tax years, which could offset future taxable income. Unless limited, CENX can utilize the tax attributes in certain circumstances to offset future U.S. taxable income and reduce its U.S. federal income tax liability.

CENX’s ability to use the tax attributes would be substantially limited if there were an “ownership change” as defined under Section 382 of the Internal Revenue Code and Internal Revenue Service rules. In general, an ownership change would occur if CENX’s “5-percent shareholders,” as defined under Section 382, collectively increase their ownership in CENX by more than 50 percentage points over a rolling three-year period. Five-percent shareholders do not include certain institutional holders, such as mutual fund companies, that hold CENX stock on behalf of several individual mutual funds where no single fund owns 5% or more of Century stock. The plan is similar to tax benefit preservation plans adopted by many other public companies with significant tax attributes. As part of the plan, the CENX board of directors declared a dividend of one preferred share purchase right for each outstanding share of its common stock and one hundred preferred share purchase rights for each outstanding share of its Series A Preferred Stock. The preferred share purchase rights will be distributed to stockholders of record as of October 9, 2009, but would only be activated if triggered by the plan.

CENX this week announced that it expects on October 28, 2009 to commence (i) an exchange offer and consent solicitation relating to its 7.5% Senior Notes due 2014, CUSIP No. 156431AH1 (the “2014 Notes”) and (ii) a consent solicitation relating to its 1.75% Convertible Senior Notes due 2024, CUSIP Nos. 156431AE8 and 156431AD0 (the “2024 Notes”). Holders who tender their 2014 Notes prior to the expiration of the exchange offer will receive newly issued 8% Senior Secured Notes due 2014 (the “Exchange Notes”). The Exchange Notes will bear interest at the rate of 8% per annum, payable semi-annually on May 15 and November 15 of each year, commencing May 15, 2010, and mature on May 15, 2014. All of the Company’s existing and future domestic restricted subsidiaries, other than foreign-owned parent holding companies, will guarantee the Exchange Notes on a senior secured basis. The Company’s obligations under the Exchange Notes and the guarantors’ obligations under the guarantees will be secured by a pledge of and lien on, subject to certain exceptions: (i) all property, plant and equipment owned or hereafter owned by the Company and the guarantors; (ii) all equity interests in domestic subsidiaries directly owned or hereafter owned by the Company and the guarantors and 65% of equity interests in foreign subsidiaries directly owned by the Company and the guarantors; (iii) intercompany notes owed or hereafter owed by any non-guarantor to the Company or any guarantor, including an intercompany note from Century Bermuda I Ltd. (which indirectly owns Grundartangi and Helguvik) to the Company which had approximately $687 million outstanding as of September 30, 2009; and (iv) proceeds of the foregoing.

This report does not constitute an offer to exchange or a solicitation of consents relating to the 2014 Notes, the 2024 Notes or any other securities of the Company. The exchange offer is being made pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) contained in Section 3(a)(9) of the Securities Act. The Company has not filed and will not file a registration statement under the Securities Act or any other federal or state securities laws with respect to the offer of Exchange Notes in the exchange offer and consent solicitation related to the 2014 Notes described above.

Source: Scottrade.com, Reuters.com, centuryaluminum.com

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

CENX is below its 50 day moving average. This bearish sign is even more significant because the moving average is also trending lower.

Bollinger Bands

CENX is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.

MACD

The MACD for CENX currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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