The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



) --



(AA) - Get Report

efforts to diversify geographically received a significant boost late last month when its joint venture with the Saudi Arabian Mining Company (Ma'aden) secured a $1 billion loan for the aluminum smelter and rolling mill at Ras Az Zawr. Alcoa owns a 25% stake in the JV named Ma'aden Bauxite and Alumina Company which is expected to commence operations in 2013 to 2014. Alcoa is the world leader in the production and management of primary aluminum, fabricated aluminum and alumina. Its competitors include



Rio Tinto

(RIO) - Get Report

, BHP Billiton

(BHP) - Get Report



(ACH) - Get Report


We have a

$19.54 price estimate for Alcoa, roughly 10% above the stock's market price.

Ma'aden and Alcoa agreed to work together on the $10.8 billion super project in December 2009. The project is slated for completion in two phases. Phase one will involve the construction of a 740,000 tonne-per-year smelter and a 460,000 tonne-per-year rolling mill and will start operations in early 2013. A bauxite mine with an annual capacity of 4 million tonnes and a refinery to process 1.8 million tonnes of alumina every year are a part of phase two and will be operational in early 2014.

The loan approval represents yet another significant step for Alcoa toward the completion of the ambitious project. This loan is toward phase two of the project, which is expected to cost about $3.6 billion to construct. Around 60% of this amount is expected to be financed through the Public Investment Fund, Saudi Industrial Development Fund, and other financial institutions and commercial banks -- with the remaining amount shared by Ma'aden and Alcoa on a pro-rata basis. This represents a capital expenditure of about $360 million for Alcoa over the next two to three years.

Once the project is completed, Alcoa will see a marked increase in its aluminum production capacity. We capture the company's aluminum sales under our primary metals division.

With the project being a vertically-integrated complex, Alcoa will also see an increase in its alumina and flat-rolled products sales -- represented by its 25.1% stake in the JV.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.