Chalco also a gold miner? Aluminium giant unveils gold leasing contracts with Bank of Communications
Chalco to enter into gold leasing and hedging agreements with Beijing bank as it seeks new sources of income. Analysts say they didn’t know Chalco had gold production
A surprise announcement by Aluminum Corp of China to enter into 3 billion yuan (HK$3.53 billion) of gold leasing contracts highlights the state-backed firm’s need to reap profits or cost savings from non-core operations as it struggles in the overcapacity-troubled aluminium industry, analysts say.
The gold leasing deal followed several asset disposals by the nation’s second-largest smelter of the lightweight industrial metal to offset losses.
“It is very difficult for Chalco to make a profit from its core aluminium operations [given its high production costs], so it needs to think of ways to generate profits or savings from non-operating activities, and gold leasing may be one,” said Huarong Securities’ Beijing-based analyst Zhang Feihong.
Although Chalco reported a net profit of 206 million yuan last year, against a net loss of 16.2 billion yuan in 2014, the profit was “heavily inflated by after-tax extraordinary gains of 6.64 billion yuan”, according to a JP Morgan research report.
The gains included a 1.77 billion yuan government grant and one-off gains from the sale of two business units and other assets, the report said.
Chalco posted a net loss of 608.3 million yuan for the first quarter of this year, as aluminium prices remained low despite a moderate price recovery.