Chinalco to buy 49pc stake in Yunnan Copper
Mainland aluminium firm Chinalco has agreed to buy 49 per cent of Yunnan Copper Group, the mainland's third-largest copper producer, in a move to diversify after its listed unit Aluminum Corp of China reported a 5.15 per cent drop in first-half profit.
Chinalco has signed a letter of intent with the Yunnan government for the investment in Yunnan Copper Group, according to a statement by Yunnan Copper Industry, the 54.3 per cent-owned listed unit of the Kunming-based group.
Mainland media said the deal cost at least one billion yuan. However, the value of the indirect Yunnan Copper Industry stake that Chinalco will gain from the purchase is worth 17.8 billion yuan, based on the Shenzhen-listed firm's last quoted price.
Zou Shaolu, the chairman of Yunnan Copper Group, declined to comment yesterday, while Chinalco could not be reached for comment.
The deal was announced before Chalco reported that profit fell to 6.4 billion yuan for the six months to June from 6.74 billion yuan a year earlier, after it cut prices of alumina, a mineral used to make aluminium. Sales jumped 31 per cent to 36.5 billion yuan.
Although the earnings decline was Chalco's first in five years, the result was better than the median estimate of 5.6 billion yuan of five analysts surveyed by Bloomberg.
Chalco, the world's second-largest alumina producer, declared an interim dividend 13.7 fen per share and a special dividend of 1.3 fen per share.
The company produced 11.8 per cent more alumina in the first half to 4.84 million tonnes and produced 1.33 million tonnes of primary aluminium, up 70.5 per cent from a year earlier.
The average selling price of alumina dropped 25.4 per cent to 2,956 yuan per tonne as supply increased while the selling price of primary aluminium fell 2.6 per cent to 17,122 yuan per tonne.
To diversify from the aluminium business, Chinalco will use Yunnan Copper Group's resources to help develop domestic and overseas copper business. However, Chalco is not involved in the deal.
The Yunnan government will keep a 47 per cent stake in the copper company after the deal, and the remaining 4 per cent will be held by two Yunnan-based companies.
Yunnan Copper Industry reported a 144 per cent jump in net profit last year to 1.2 billion yuan. The company's shares were suspended from trading yesterday pending an announcement. The stock closed at 53.26 yuan last Friday.
Analysts said the acquisition highlighted Chinalco's efforts in diversifying from aluminium, as the company also owns copper, molybdenum, magnesium and other metal resources.
Chinalco earlier this month completed an US$860 million takeover of Peru Copper, owner of the South American nation's third-largest deposit of the metal used to make wires and pipes.
Yunnan Copper Group has said it aims to boost output more than 60 per cent to 600,000 tonnes by 2010 to tap demand in the mainland, the world's biggest copper consumer. The company is also seeking opportunities in such countries as Mongolia and Russia.