Exclusive: Confident Chinalco sees deals in 2010

By Tom Miles

BEIJING (BestGrowthStock) – Aluminum Corp of China (Chinalco), the top aluminum group in the country, will further expand into overseas resources, and its confidence remains undimmed by the failure to raise its stake in Rio Tinto (RIO.AX: ), Chinalco President Xiong Weiping told Reuters.

“We will make some breakthroughs in overseas development this year,” Xiong said in an interview on Sunday in his Beijing office.

Chinalco, which plans to focus increasingly on copper, rare metals and coal, burst onto global investors’ radars by investing in Rio Tinto (RIO.L: ) in February 2008, a deal that helped to derail a merger plan between Rio and its rival BHP Billiton (BLT.L: ) and made Chinalco the global mining dealmaker to watch.

But a $19.5 billion bid to double its stake in Rio Tinto last year came unstuck when the Anglo-Australian company spurned its advances in favor of a tie-up with BHP.

“This will not affect Chinalco’s development and confidence in resolutely implementing its strategy of becoming an international mining company,” Xiong said.

Chinalco, the top shareholder in Rio with a 9.3 percent stake in the mining group, has no plans to sell its shares, he said.

“Our investment in Rio was because we are optimistic about the global mining industry and the potential value of Rio. Currently there are lots of rumors about this. But I can tell you, being the responsible person, that we do not have any plans or discussions about selling nor any plans or discussions about disposing of the stake in Rio Tinto.”

Chinalco’s strategy is to focus on shifting production to areas that are rich in resources and energy and concentrating on major consuming markets, as well as upgrading technology and saving energy, in China and overseas.

It is building a coal business and a wholesale business to add to its existing seven business divisions, Xiong said, without elaborating on the plan.

The company is in talks with many potential partners, including Rio, and hoped to participate in Oyu Tolgoi, the Mongolian copper-gold project being developed by Rio’s partner Ivanhoe Mines (IVN.TO: ), he said.

“Since Chinalco is the largest non-ferrous metal company in China, and China has a geographic advantage with Mongolia, we believe that having a big company like Chinalco involved would give some helpful impetus to the project,” he said.

Chinalco also has a copper project in Peru, which will begin construction in May or June this year and will start operating in 2012 with annual capacity of 1 million tonnes of copper concentrate, and a Saudi Arabian aluminum smelting joint venture, which would also see progress this year, he said.

Xiong said he expected Rio’s value to rise this year thanks to rising commodity prices and growing demand. In China, the real estate, auto and power sectors would support aluminum demand this year, he said.

Chinalco’s listed unit and operator of its aluminum and alumina assets, Chalco (2600.HK: ), would also see much higher revenue and a better performance this year than in 2009, he said.

China’s aluminum output is expected to grow 30 percent to 17 million tonnes this year, while consumption will grow 20 percent to 16.5 million tonnes, he said. Alumina production will grow 30 percent to 31 million tonnes, while demand will rise 33 percent to 35 million tonnes.

He was not worried about oversupply in China or globally, or the 580,000 tonnes of aluminum stockpiled by China’s State Reserves bureau and a further 500,000 tonnes stockpiled by local governments in China last year.

“I think the SRB’s stock is strategic and for the longer term, so it won’t go into the market in a short time period, and the total 1.08 million tonnes of stockpile is small compared to the current national aluminum production and consumption. Even if it was all released, it would not have a great influence on the market.”

But he was worried about stockpiles of more than 4 million tonnes of aluminum held in London Metal Exchange stocks, although about 3 million tonnes were locked into financial transactions, he said.

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(Additional reporting by Polly Yam in Hong Kong; Editing by Ken Wills)

Exclusive: Confident Chinalco sees deals in 2010