Rio Tinto Group

Chinalco prepares to spend big on resources

PUBLISHED : Tuesday, 25 March, 2008, 12:00am
UPDATED : Tuesday, 25 March, 2008, 12:00am

Non-ferrous metals on the list of potential assets

Aluminum Corp of China (Chinalco) plans to spend between 20 billion yuan (HK$22.1 billion) and 30 billion yuan on acquisitions this year as the mainland's largest metal company searches for resources to feed growing industrial demand at home.

The company spent US$14 billion buying a stake in Rio Tinto earlier this year in an attempt to prevent a hostile bid for the world's third-biggest mining company by BHP Billiton.

'Resources are the basis of the company's sustainable development,' Chinalco president Xiao Ya-qing said. 'The group will focus on resources acquisition and control both in China and overseas.

'The investment may be even bigger than between 20 billion yuan and 30 billion yuan. It depends on the progress of negotiations and the market situation.'

Mr Xiao declined to disclose specific targets but said non-ferrous metals would be the major focus.

Chinalco's purchase of a 12 per cent stake in Rio with Alcoa of the United States was the largest overseas acquisition by a mainland firm.

Mr Xiao said the Rio deal provided a showcase of a mainland company acting as a key player in a major overseas acquisition, hiring law firms, investment banks, political advisers and media people.

'It was a ground-breaking deal in a top-tier overseas merger and acquisition for Chinalco, but it will not be the last,' he said.

With the rising strength of mainland companies, it was possible that both Chinalco and other companies would make even bigger overseas acquisitions in the future, Mr Xiao said.

But he said Beijing should provide more guidance to mainland firms looking for resources to feed an economy that had grown more than 10 per cent a year since 2001.

'The government should give more guidelines on potential risks, including the political and legal risks of different countries,' he said.

Mr Xiao said resources were becoming more globalised along with the economy and Chinalco would continue to seek co-operation with other international mining giants. He said the aim was to learn from these other companies, especially their management skills and technology.

Teaming up with Alcoa, once a strategic investor in listed flagship Aluminum Corp of China (Chalco), in the Rio deal was one example of that co-operation.

'Chinalco cannot be a closed company,' Mr Xiao said. 'It has to be open to co-operation with other firms, both global and domestic.'

He said many companies wanted to become strategic investors with Chinalco, but so far no concrete decisions had been reached.

Chinalco welcomed other companies co-investing in Chalco's A$3 billion (HK$21 billion) bauxite mining and refining project in Aurukun, Australia, and Chinalco's Peru Copper project, which it took over for US$860 million late last year.

Spend, spend, spend

Chinalco, the mainland's largest metals company, wants more resources

The maximum amount the company plans to spend on acquisitions, in yuan: 30b yuan

The amount it paid for a 12 per cent stake in Rio Tinto with Alcoa, in US$: $14b