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Firm sees metal as next major profit contributor

Chinalco, the mainland's biggest alumina and aluminium producer, plans to spend more than 30 billion yuan to expand its copper business over the next few years with the aim of becoming the industry leader, said Chalco chairman Xiao Yaqing.

'Copper will grow and become the next major profit contributor of Chinalco after aluminium,' Mr Xiao told the South China Morning Post.

The Beijing-based firm, which just completed an US$860 million takeover of Peru Copper and unveiled its plan to buy a 49 per cent stake in Yunnan Copper Group, was looking to announce more copper-related deals by the end of this year, Mr Xiao said.

'In the overseas market, the deals would be mainly copper mines, while locally, they will comprise mines, smelting and processing plants. We're in talks on several projects and are confident in concluding some,' he said.

Mr Xiao declined to reveal details on its planned acquisitions and other investments it may get involved with. The  deals with Peru Copper and Yunnan Copper cost about 20 to 30 billion each.

Chinalco, the parent of listed Aluminum Corp of China (Chalco), is betting on the booming prospect of copper industry as copper resources in the mainland are even scarcer than aluminium.

The mainland, the world's biggest copper consumer, needs to import about 75 per cent of its copper concentrates to produce refined copper.

As the largest diversified metals and mining company in the mainland, Chinalco invested more than two billion yuan in its Henan, Hubei and Shanghai copper processing plants, with a total output of 160,000 tonnes of copper plate and copper strip last year.

'We'll invest four billion yuan more into the three plants to boost their total annual capacity to 500,000 tonnes by the end of next year or early 2009, bringing the total investment to about seven billion yuan,' Mr Xiao said.

The acquisition of Peru Copper and Yunnan Copper would give Chinalco total copper reserves of about 20 million tonnes, even larger than that of Jiangxi Copper, the biggest copper producer in  the mainland, Mr Xiao said.

'Copper business now accounts for less than 10 per cent of Chinalco's turnover, but it would become a significant part in the years to come,' Mr Xiao said.

Mr Xiao said Chinalco would mainly rely on internal resources, bank borrowings and bonds to fund copper projects.

It is also in talks with international funds to co-invest in overseas projects.

He said his company would not rule out the possibility of raising funds in the capital markets such as spinning off its copper assets but stressed that it would not happen in the short term.



Chinalco earmarks 30b yuan for copper business