Chalco allocates 16b yuan to expand capacity, buy parent's assets

PUBLISHED : Tuesday, 13 March, 2007, 12:00am
UPDATED : Tuesday, 13 March, 2007, 12:00am

Aluminium giant to acquire more smelters after completing its share sale on the Shanghai exchange

Aluminum Corp of China (Chalco), the mainland's largest producer of the metal, has set aside 16 billion yuan to expand its alumina refinery and aluminium smelting capacity this year, including buying 940,000 tonnes of aluminium smelting capacity from its parent firm, chairman Xiao Yaqing said.

'Assets injection from our parent Chinalco will speed up after we complete our A-share listing on the Shanghai Stock Exchange,' Mr Xiao said yesterday, a day after the company announced a better than expected 67 per cent jump in profit to 11.74 billion yuan for last year.

Chalco's A-share listing, which is awaiting approval from the China Securities Regulatory Commission, was expected to be launched on the Shanghai exchange as early as the end of this month or early next month, Mr Xiao said.

The Beijing-based company, which is aggressively expanding its aluminium smelting capacity, had increased this by 65 per cent to 2.48 million tonnes by the end of last year, mainly through mergers and acquisitions.

It acquired controlling stakes in four aluminium smelters for 1.38 billion yuan last year, which contributed a combined profit of 458 million yuan for the year.

The expansion of its smelting capacity increased internal use of its self-produced alumina - the raw material for making aluminium - to 40 per cent last year from 26 per cent in 2005. (Two tonnes of alumina are needed to produce one tonne of aluminium.)

Mr Xiao said the ratio would further rise with more smelting capacity, cutting the firm's risk exposure to changes in spot alumina price.

Chalco's aluminium smelting capacity was expected to increase to three million tonnes this year and to 3.5 million tonnes over the next three years while its alumina refining capacity was expected to rise to 9.94 million tonnes this year and 13 million tonnes over the next three years, he said.

Besides buying smelting plants from Chinalco, Mr Xiao said, Chalco would also acquire downstream aluminium processing plants from its parent firm in the next two to three years to provide another growth engine for the company. He did not give details.

The aluminium-processing facilities that might be injected into Chalco include Southwest Aluminium, Chinalco-SWA Plates and Strips, Chinalco Ruimin and Chinalco Henan Aluminium Fabrication, mainland newspapers reported earlier.