Chinalco in Talks on New Australian Mining Investment

July 23 (Bloomberg) -- Aluminum Corp. of China, the state- controlled company whose $19.5 billion investment in Rio Tinto Group was rejected last month, held preliminary talks to invest in new mineral projects in Western Australia state. Chinalco, as the company is known, will “conduct metals prospecting activities in Western Australia and seek investment opportunities either by independent investment or joint ventures,” Chairman Xiong Weiping said today at a conference in Beijing. “We’re only at the initial stages of talks.” Xiong, who met with Western Australia state premier Colin Barnett yesterday, is seeking overseas investments as demand for raw materials surge in China, the world’s biggest user of metals. Tensions between China and Australia have been heightened with the July 5 detention of four Rio executives in Shanghai for allegedly stealing state secrets. “There is just this insatiable appetite for commodities from China and OK, they’ve been rebuffed by Rio, but that doesn’t mean they are just going to go anywhere else,” Peter Arden, an analyst at Ord Minnett Ltd. in Melbourne, said by phone. “They still really want to get products out of Australia.” The collapse of the Rio-Chinalco deal was discussed at the meeting yesterday, Barnett said, without giving details. Chinalco has denied any connection with the detention of Rio’s iron ore chief in China, Stern Hu, an Australian national, and three Chinese employees. ‘Vast Opportunity’ “Despite what had occurred, there was still vast opportunity for both China and Western Australia to benefit from a strong relationship,” Barnett, who is visiting China this week, said in an e-mailed statement today. “There is a lot of scope for Chinalco to become more involved in projects, especially in new mineral exploration.” Rio Tinto last month rejected Chinalco’s investment in its mines amid objections from Australian politicians and shareholders. The London-based company instead said it will create an iron ore venture in Western Australia with rival BHP Billiton Ltd. to save costs. Barnett said today he doesn’t favor the BHP-Rio iron ore proposal on concern production in the state would be dominated by the venture. The Australian state is aware of concerns customers, including those in China, have about the venture, which would need government approval, he said. “I suspect it will occur, but not in a way that Rio and BHP might currently imagine,” Barnett said today. Barnett also met with Sinosteel Corp. officials and encouraged China’s largest iron ore trader to participate in the planned A$4 billion ($3.3 billion) Oakajee port and rail project in the mid-west region of the state, the statement said. The Oakajee port development is a venture between Mitsubishi Corp. and Murchison Metals Ltd. “I made it known that the W.A. State Government would be supportive of Sinosteel increasing its share in other Mid-West companies,” he said. --Xiao Yu in Beijing. Editors: Teo Chian Wei, Tan Hwee Ann. To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net.