Rio Tinto Group

Chinalco rules out need for funds to buy assets overseas

PUBLISHED : Thursday, 06 March, 2008, 12:00am
UPDATED : Thursday, 06 March, 2008, 12:00am

Aluminum Corp of China (Chinalco) and a listed unit had no immediate plans to raise money to help fund their overseas acquisitions, the company's top executive said.

The world's third-largest alumina producer would continue to seek overseas acquisitions as part of its strategy to transform into a global mining firm, Chinalco president Xiao Yaqing said yesterday at China's annual legislative session in Beijing.

Mr Xiao rejected market concerns that Chinalco, which earlier this year led a US$14 billion acquisition of 12 per cent of Rio Tinto, may raise funds through its Hong Kong and Shanghai-listed flagship, Chalco, to help fund overseas expansion.

He said Chinalco and Chalco were financially healthy and that he did not see any need for the group to raise funds through Chalco in the near term.

'Chinalco has 200 billion yuan of assets and our gearing is only about 40 per cent,' Mr Xiao said.

Taking a stake in Rio Tinto, the world's No3 mining company, was the largest overseas acquisition by a mainland firm and a groundbreaking deal in top-tier overseas mergers and acquisitions for Chinalco, he said. But it will not be the last one.

Regarding market speculation over whether Chinalco might buy a larger stake in Rio Tinto or even enter a bidding war against BHP Billiton, Mr Xiao only said the next move would depend on circumstances.

'To pursue a sustainable development and continue to post sustainable profit growth, it is a must for Chinalco to go global and co-operate with other global mining groups to invest in the exploitation of mineral resources,' Mr Xiao wrote in an article published in the People's Daily yesterday.

The Beijing-based state-owned company would diversify its business from aluminium to copper, rare metals and other non-ferrous metals with an integrated value-chain from mining, refining, smelting to processing, he wrote.

This month, Chinalco agreed to take over a metals processor - Shenyang Nonferrous Metals Processing Plant - for 412 million yuan.

Chinalco plans to invest more than three billion yuan to restructure and increase the capacity of the Shenyang-based plant, which produces copper, nickel, titanium, minor metals and their alloys.

Mr Xiao yesterday denied reports that China Investment Corp, the mainland's US$200 billion sovereign wealth fund, was in talks to buy a stake in the company or that the two firms would team up to buy overseas resources assets.

More mainland firms are searching for overseas acquisitions, especially in mineral resources and energy to feed the country's growing demand. But not all such attempts succeed.

Liu Deshu, president of oil and petrochemical firm Sinochem Corp, yesterday confirmed the company's bid to buy the West African assets of US oil firm Devon Energy Corp had failed. Even so, he said the firm would continue to seek opportunities to buy oil and gas assets in Africa. and Latin America.