Companies

Chalco expanding hunt for resources

By Zhou Yan (China Daily)
Updated: 2010-08-25 09:28

An employee pulling out an aluminum rod at a store in Shanghai. KEVIN LEE / BLOOMBERG

SHANGHAI - Aluminum Corp of China Ltd (Chalco), the nation's biggest maker of the metal, on Tuesday said it will diversify into other natural resources like coal, copper and rare earths.

"We are planning to set up three coal production bases over the next three years to reduce electricity costs," said Chalco Chairman Xiong Weiping.

Electricity accounts for 40 percent of the total cost in making electrolytic aluminum, said Wang Lixin, an analyst at industry consultancy firm Umetals.com.

Chalco reported a 500 million yuan ($73.5 million) loss in June, pushing the company into a second-quarter loss of 96.7 million yuan.

Aluminum prices on the London Metal Exchange declined to $1,828 per ton in June, after reaching a high of $2,447 per ton in April.

Chalco, however, expressed confidence that it would return to profit in the third quarter, as it has made significant structural adjustments.

"Going forward, Chalco will put priority on the development of copper, which remains a scarce but strategically important mineral," Xiong said.

China, the world's biggest consumer of copper, heavily relies on imported copper ore. The nation imported 3.11 million tons of the metal in 2009, accounting for over half of the total consumption during the year.

"We're basically interested in any copper-related projects that contain large scales of reserves and are low cost," said Xiong.

He shrugged off questions on whether the company is in talks with Rio Tinto to jointly develop the Oyu Tolgoi copper and gold mine in Mongolia.

But he said one of Chalco's main focuses in the second half is to roll out its roadmap in countries and regions rich in natural and energy resources.

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Chalco's parent company Aluminum Corp of China (Chinalco) in July got approval from the government to diversify into mining resource exploration, non-ferrous metal processing, and related trade and engineering technology services.

Chalco, the listed arm of Chinalco, has become a major platform for its parent company to meet the target of expanding its "seven pillars of businesses", such as aluminum, copper and rare earths, Xiong said.

Chalco will also actively develop its rare earths-related businesses in the nation, he said. "Rising electricity prices and aluminum overcapacity has largely squeezed Chalco's profit margins. That, to some extent, explains the logic behind the company's diversification moves," said Wang.

Chalco said it is in talks with the Queensland government in Australia for restarting the Aurukun bauxite project. The A$3 billion ($2.65 billion) project was halted in June this year due to unfavorable factors.