Chalco takes domestic M&A path

PUBLISHED : Monday, 30 April, 2007, 12:00am
UPDATED : Monday, 30 April, 2007, 12:00am

Aluminum Corp of China (Chalco), the world's second-largest maker of alumina and the country's biggest aluminium smelter, will focus on developing overseas bauxite resources and launching merger and acquisitions domestically after today's A-share listing.

'We have all kinds of plans for mergers and acquisitions, but we don't have a timetable for now,' said chairman Xiao Yaqing at a press briefing yesterday.

The Hong Kong and US-listed alumina producer makes its A-share debut in Shanghai today, having issued 8.18 billion yuan worth of shares - 1.24 billion shares at 6.60 yuan each - which will be used in exchange for shares in its two listed units, Shangdong Aluminium Industry and Lanzhou Aluminium.

The two companies will be delisted immediately.

Chalco plans to build an alumina plant with annual production capacity of 2.1 million tonnes and buy a bauxite mine with a production capacity of 10 million tonnes in Queensland, Australia. Mr Xiao said the company had no intention of buying global rivals.

Alumina is the semi-finished material refined from bauxite ore and processed to make aluminium.

Chalco is also looking into developing Vietnam's Dak Nong bauxite project and forming a joint venture with Vietnam National Coal-Mineral Industries Group.

With the volatile nature of alumina prices, analysts said the company's efforts to become a large integrated alumina maker would make it less vulnerable to the risks of commodity cycles.

Mr Xiao said he was optimistic about alumina prices as China was experiencing rapid domestic consumption.

Chalco had 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, Mr Xiao said.

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 increase to 9.94 million tonnes this year and 13 million tonnes over the next three years.

It aims to increase its annual capacity for alumina to 13 million to 14 million tonnes by 2010 from 8.3 million tonnes in 2005, and more than triple its annual aluminium smelting capacity to five million tonnes from 1.5 million tonnes in 2005.

It produced about 32 per cent more alumina at 9.5 million tonnes last year, while aluminium volume had almost doubled to two million tonnes.

The company raised as much as five billion yuan in February by selling long-term corporate bonds to fund its alumina refining and smelting capacity expansion.