Sometimes smaller is better, and in comparison to its larger peer, Alcoa Inc (NYSE:AA), Century Aluminum Co (NASDAQ:CENX) appears to be the best company.

Century Aluminum

Right now, Century Aluminum Co (NASDAQ:CENX)’s most attractive quality is its discount to book value. However, the company also has some interesting assets and future growth plans.

Century Aluminum Co (NASDAQ:CENX) has five main production facilities, one under construction and two carbon cathode/anode manufacturing facilities. The firms, a leading aluminum production facility, is located in Iceland and the new facility under construction is also located in Iceland.

Icelandic facility is actually a jewel in the company’s crown

Century Aluminum Co (NASDAQ:CENX)’s Icelandic facility is actually a jewel in the company’s crown. The plant cost $1 billion to construct but has generated sales in the region of $1 billion during the past two years. Moreover, the facility gets its power from geothermal and hydro power sources, which cuts costs and pushes the average cash cost per ton of aluminum produced to a level 17 percent below the cash cost per ton of production for the company’s U.S.-based facilities.

In addition, this relatively low cost aluminum production in Iceland allowed the company to realize profit margins of 20 percent per tonne of aluminum produced for its Icelandic facility, based on LME average sales figures. In comparison, Alcoa Inc (NYSE:AA) only realized a 12 percent profit margin on its production per ton of aluminum produced during the quarter.

Century Aluminum is in the process of upgrading

What’s more, Century Aluminum Co (NASDAQ:CENX) is in the process of upgrading its existing Icelandic plant, already its largest production facility, to increase production by 20 percent. Furthermore, as I have already mentioned, a new aluminum production facility is already under construction within Iceland, which should add an additionally 360k metric tonnes to company production when completed; a 35 percent increase from current levels. Another low-cost production facility in Iceland should boost Century’s standing as a globally competitive aluminum producer.

Strong balance sheet

Unlike many other resource companies, Century Aluminum Co (NASDAQ:CENX) has a strong balance sheet and its current discount to book value offers some real value.

For a start, debt is low, the company’s total debt stands at $256 million but $127 million in cash reduces net debt to $129 million. With assets of $1.85 billion this give a net debt to asset ratio of 7 percent. Current assets cover current liabilities 1.9x however, the bulk of current assets are inventory so the quick ratio falls to 1.1x. Still, current assets including inventory only just fall short of covering all current liabilities and long-term debt put together. Total assets cover total liabilities 2.1x, which gives a net asset value per share of $10.92, 34.3 percent above current levels.

That said, earnings have been negative for four of the last five quarters and two of the last four years. Nonetheless, Century has been cash-flow-positive for two of the last four quarters and two of the last four years, which is consider to be more important and a more telling indicator of the company’s profitability.

Century Aluminum’s low cost production and plans for expansion

So overall, Century Aluminum Co (NASDAQ:CENX)’s low cost production and plans for expansion are highly appealing qualities. Additionally, the company’s strong balance sheet and cash generation reinforce the company’s appeal. With Century’s stock currently trading at a 34 percent discount to the net asset value per share, Century could be a risk worth taking.