Aluminium Corp of China (Chalco) has signed a letter of intent to set up an aluminium smelter in what could be its second co-investment with a power company to lower costs. In a statement, Chalco, China's dominant alumina and aluminium producer, said the letter was signed with Hong Kong Huazhong Aluminium Group, Yichang City Yiling State-Owned Asset Management and China Yangtze River Three Gorges Engineering Development Corp. The project will be in Hubei province's Yichang city. A Chalco official said China Yangtze River would be the electricity supplier for the planned smelter and the letter of intent stipulated that the tariff should be no higher than 20.5 fen (about 19.21 HK cents) per kilowatt hour, excluding value-added tax. This is 11.63 per cent lower than the 23.2 fen average tariff Chalco is paying. Chalco plans to divide the project into two phases, each with 250,000 tonnes of capacity. Investment in the first phase will be three billion yuan. Chalco had signed a joint-venture deal to build an aluminium smelter and a power plant with Shanxi Zhangze Electric Power.